Why is Dubai still popular?
Despite the fact that the property sector in Dubai has collapsed, many businesses have gone under and expats in the region are struggling to find work, there is still massive interest in Dubai from all around the world. So what is attracting some new people to this area of the world even in these troubled times?
Overview of Dubai
While for many people the story about Dubai may be fairly new, we must remember this is a region of the world which has been growing in influence and financial strength for some time. It may well have only been over the last decade that the state of Dubai has really hit the headlines and attracted enormous overseas investment, but for many people it was a goldmine waiting to happen and many people have made enormous amounts of money in property and financial services.
The Dubai economy
Historically the Dubai economy has been very much centred upon the oil industry however, the authorities in the region realised some time ago that oil reserves in Dubai would not last forever and had the foresight to make plans for the future. At this moment in time oil and gas revenues account for less than 6% of the $40 billion gross domestic product in the state with real estate and construction top of the list (22.6%), overseas trade (16%), entrepot (15%) and financial services (11%) now leading the way.
The authorities have done very well to attract some of the largest names in the real estate, construction and financial service industry, many of whom now use Dubai as a base to increase their exposure to the region as a whole.
The Dubai property market
As we have covered before, the Dubai property market literally went up in a straight line for a few years prior to the recession, allowing many early-bird investors to make significant gains before leaving the market. However, due to a mixture of inexperience on behalf of the authorities and the greed and fear factor instilled into many investors, the market was pushed to levels which were never going to be sustainable in the short to medium term. Even prior to the recession a number of seasoned investors had attempted to call time on the Dubai property market boom only to be drowned out by the ever-growing “need” for investors to have at least some exposure to the Dubai property market.
The fall of the Dubai property market
As the worldwide recession began to kick in back in 2007 it became apparent to many people that Dubai was literally on the edge of a precipice. However, such was the blue sky view of many investors in the region that the market held up fairly well in the early days of the worldwide recession, with some people actually suggesting it was something of a safe haven in these troubled times. However, as trouble brewed overseas and many overseas investors sold their Dubai properties to consolidate their cash positions and protect their investments it soon became apparent that the market was set to fall.
What began as a trickle soon turned into a river and many investors literally jumped ship at any price to try and retain as much liquidity as possible.
The Dubai authorities
As we suggested above, the Dubai authorities are still fairly inexperienced in the control and structure of a growing economy, something which has become more and more apparent over the last few months. While attempting to protect the Dubai financial system many believe they went overboard with new regulations effectively strangling the financial sector in the region and cutting off the liquidity lifeline for many property investors. However, it does appear that the authorities have learnt their lesson and while there is still some way to go before we see the bottom of the Dubai property market there is hope for the future.
Expats in Dubai
While a number of expats have left the region after the property market collapsed and the employment arena began to fall around their ears, many still remain in the state for the longer term. Even though the ongoing recession has hit many businesses, individuals and markets very hard there is a feeling that this current period of pain will actually turn out to be a very useful consolidation phase in the long-term growth of the Dubai economy. As a consequence, there is still enormous interest in Dubai from expats looking to leave their homelands and start afresh overseas. Whether now is the time to move to Dubai or not is open to debate but the death of the Dubai economy has certainly been over exaggerated!
The Dubai culture
Again, as we have covered on many occasions there are a number of conflicting cultural differences between the West and Dubai which are becoming more and more apparent as the authorities look to regain control. Initially, when overseas investors first came to Dubai there was a feeling that the authorities were happy to “overlook” a number of issues such as alcohol, etc, but this period of restraint by the authorities appears to have ended. That is not to say that the authorities are strict on Dubai beliefs and practices, but those who look to mock the local culture and openly flout regulations will receive little sympathy in the region.
The future of Dubai
This consolidation phase of the long-term growth in the Dubai economy may turn out to be one of the turning points for the state. It has given many investors a short sharp shock and opened many eyes to the fact that no economy is recession proof and no economy can keep on rising in a straight line. The authorities also have a part to play in the short, medium and longer term and while mistakes have been made, it would appear that lessons have been learned.
Conclusion
Dubai has been a rollercoaster ride over the last 10 years, leaving many investors decimated and businesses struggling at the moment. In essence, the Dubai economy fully reflects the greed and fear which many investors have experienced over the last decade as they looked to move to the next “hotspot” in the worldwide investment market. Maybe in the future we will see investors take a more sensible approach to investment in Dubai and perhaps remove some of the rose tinted spectacles which many were wearing just prior to the downfall.
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