Dubai: Dubai has learnt lessons from the global financial crisis, including the importance of budget discipline and the need to regulate its property market, the Department of Finance said in a research paper published on Thursday.
The paper may help to reassure investors in Dubai as the emirate’s asset markets recover, raising concern about the risk of them overheating once again.
In its paper, titled “The Global Financial Crisis, Lessons Learned”, the Department of Finance lists 11 lessons. Several of them are related to the property market, including the need to register real estate deals and prevent harmful speculation, and the importance of regulating the rental market to “keep it within permissible limits”.
At least some of those lessons appear to have translated into policy; last year Dubai doubled its real estate transaction fee to 4 per cent in an effort to make speculation harder.
The paper also suggested that Dubai should adjust its economic focus, by emphasising commercial rather than residential real estate, and by relying on “advanced” industry rather than property to fuel the economy.
Other lessons listed in the paper include “fiscal discipline on lending operations”, an apparent reference to the fact that state-linked companies’ borrowing before the global financial crisis and needed to restructure their debt.
The Department of Finance also mentioned the need to monitor the economy and review development plans, and to keep the size of the public sector within “acceptable boundaries”.
Buoyed by a renewed inflow of money from abroad, Dubai’s residential real estate prices jumped more than 20 per cent last year and analysts estimate they may return to pre-crisis levels next year.
The International Monetary Fund estimates about $78 billion of debt held by Dubai and related entities will come due between 2014 and 2017.