Dubai's glitter less shiny

According to this latest article in The Toronto Star, which is a very balanced article, Dubai is going through a downturn. Most points mentioned in the article are quite correct.

However, I would like to balance it further with a few more points as my perspective.

Dubai always has had a transient population. Every couple of years, most people leave Dubai for one reason or another. Hence, it is very difficult to find a professional with over 5-10 years of local experience in Dubai. Most people you meet would have been in Dubai for less than 4-5 years. Whereas most businessmen, at least the successful ones, usually have been based in Dubai for over 10-20 years. This is mostly true because a successful businessman cannot leave any city/country purely because he is successful.

Of course, Dubai has started losing jobs in the last few months and especially after Dec 2008. However, most of these jobs were created over the last 2-3 years and hirings were happening at a very rapid pace. Now the market is balancing the overshooting of the job growth and salary growth. Cost of living including rents just went through the roof especially since 2005. This is getting corrected with inexperienced and less qualified people unfortunately losing jobs because the liquidity and profits of real estate sector are unable to be re-invested into the system to further enhance the growth and reducing the future growth potential and causing job losses and lack of profits. Many real estate speculative investors and speculative developers are having extremely difficult times and in turn are bringing real estate and other sectors down.

Another thing that has not worked in Dubai's favour is the falling currencies of Europe, UK, Russia and India. Majority of new money was indeed coming into Dubai from these 4 regions. Additionally, the lower price of oil and ongoing crisis in almost countries is not helping either. Banks have slowed their lending for personal loans, mortgages and project finance.

Dubai may hit a bottom by June when most schools close and the global crisis becomes worse and the heat of Dubai makes the retail sector even worse than it already is today. The opening of 3 new large malls in last 4 months with another one slated to open in a month or two is definitely not helping. although the Govt has raised new money last week and CDS spreads (Credit Default Swaps) of Dubai have declined, the mood of average people in the city is definitely not improving with the growing uncertainty.

Persian Gulf's 'City of Gold' losing its glitter

Oakland Ross
MIDDLE EAST BUREAU
Mar 01, 2009 04:30 AM, EST