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Dubai: Global financial turmoil may be painful for Gulf Arab economies but top executives said on Tuesday it could also weed out property and bourse speculators looking for a quick buck and help curb spir-alling inflation.
While few expect to escape unscathed from the worst financial crisis in 80 years, Gulf executives told a Reuters Middle East Investment Summit the region would continue to grow, albeit at a steadier, and perhaps more sustainable, rate than the giddy days of $150 oil.
"Demand is still there and will continue to be there. Any responsible investor or developer going into a project is going into it the long-term," said Mohammad Al Hashimi, executive chairman of Dubai's Zabeel Investments.
"Someone playing a dangerous cash-flow kind of game or ones that don't have the funds in place and try to go in and do the off-plan kind of sales, book the ballroom in a hotel, a couple of ad spaces, a couple of designs... those guys are finished."
Dubai prompted a real estate boom across the Gulf when it opened up its property sector to foreign investment in 2002.
Residential property prices in Dubai rose 42 per cent in the first quarter alone, according to Colliers International, and property costs have been the leading driver of inflation that has hit double digits around the fast-growing region.
"The unrealistic returns people were getting on speculative products, putting the minimum downpayment on a project that had yet to see the light of day then ... flipping it on for 50-100 per cent on your equity in a short period of time, that has gone out of the window, which is not a bad thing," Hashimi said.
Some developers have already begun to scale back or delay major expansion as credit lines close but slower growth means inflation in the region has also begun to show signs of cooling.
Inflation in the biggest Arab economy, Saudi Arabia, eased to 10.35 per cent in September from 10.9 per cent in August. In Kuwait, inflation eased to 11.1 per cent in July from 11.35 per cent in June.
"Where you've got projects that are consumer-related and they are still really on the drawing board, that is where they may be delayed or cancelled and that may not be a bad thing," said Richard Webster, head of investment at Burgan Bank.
"Things which are not really well thought out in the next 12 months, it will be harder for them to start ground-breaking activities."
Even amid tighter credit and lower oil prices, executives said economic fundamentals in the Gulf remained strong. "There is definitely an increased interest in investment in the region. For many this is the one bright spot," said Tom Speechley, executive director of Abraaj Capital.
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