Interesting story about Dubai Real Estate in the Economist. The direction for the market is kind of inconclusive but I have drawn my conclusions in my note below.
http://www.economist.com/world/mideast-africa/displayStory.cfm?source=hptextfeature&story_id=12381473
First of all, kudos to the Economist, to bring Dubai real estate market further in international media's attention which is what Dubai deserves. Dubai (Inc.) has done an incredible job to place Dubai on the international map in a short time span of 5-10 years, prior to which most international denizens had no clue where Dubai was!
Most but not all commentators are negative on Dubai, I wonder why? Interestingly, none of them use any facts or figures but just their personal opinions based mostly on their personal experiences.
The facts are that Dubai receives much over 200,000 new residents every year (with Dubai's resident population of below 2m), it received 7m tourists in 2007, it allows non residents to open bank/investment accounts and since 2002 has allowed foreigners to own real estate too. Yes, there may be some human rights issues, but someone please let me know that in which country are the poor people not exploited or their rights not abused? History is littered with examples where poor people were enslaved, tortured and exploited to build almost all the wonders of the world or build the bridges or fight the wars!!! However, the workers in Dubai come here on their own free will to earn a living better than in their home countries. They have the full right to return if they want to but they choose to stay because back home their conditions are even more worse.
As per the article, most immigrants are building workers, but then, I do not understand how the multi million dollar homes are being gobbled up and despite all negative reports by Morgan Stanley et al over the past 5 years (at least 1 report should come true for Morgan Stanley to maintain their credibility) has the Dubai market continued to grow since 2002. Dubai being a small city just needs a few hundred rich people every year to buy their residential and commercial properties in addition to a few hundred local residents who need to move up and buy their own properties for, be it their ego, be it social pressure to own their own house or just as an investment because the new renters are willing to pay the high rentals!
If Dubai real estate and Dubai city is so scary and will fall, then why has it not fallen since local residents were allowed to purchase in freehold in the year 2000 and foreigners since 2002. If I am not mistaken most developed countries have been through 1 recession already (anyone remember the Tech boom of 2000 or 9/11 crash worldwide) and currently undergoing another one!! None of the previous crashes impacted here despite low oil prices then why should this recession affect Dubai with oil prices so high. Dubai stock markets do not truly reflect the condition of its economy purely because Dubai is still largely a trading based economy and not a manufacturing one. This is the main reason for its insulation from worldwide economic downturn and not high oil prices or anything else.
We must give credit to the smart brains who run and manage Dubai and allow them to do their jobs wherein they let everyone enjoy fruits of their hard work i.e. make newcomers feel welcome in Dubai, allow them to run businesses and own properties in a low crime society with 365 day sunshine and enjoy the lifestyle of the rich and famous, that also tax free with no repatriation restrictions!
Now all those who wish to move to Dubai instead of Vegas, please raise their hands!! :)