Dubai's Economy - FACTSPosted on: 4th April 2018
Sheikh Rashid bin Saeed Al Maktoum, the father of Sheikh Mohammed, the current Ruler of Dubai and Vice President of the UAE, understood the transience of the wealth gained from oil.
Sheikh Rashid’s famous quote – “My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, his son will drive a Land Rover, but his son will ride a camel” – reflected his concern that Dubai’s oil would run out within a few generations – and that there would be little to show if the oil revenue was not invested wisely.
As a result, he spent the revenue from the best productive oil years on creating the future of Dubai in diversified projects such as dredging and widening of Dubai Creek (early 1970s), and building Port Rashid (1972), Al Shindagha Tunnel (1975), Jebel Ali Port (1979), Dubai World Trade Centre (1978) and the Dubai Drydocks (1983).
In just over a decade of ground-breaking development, Sheikh Rashid laid the foundations for Dubai’s spectacular economic growth that is evident today.
However, I have had recent conversations with people, both abroad and in the city, who complained about Dubai’s economy - “it’s not as good as it was” represents an opinion that I have an issue with.
Similarly, the print media has been guilty of late in expanding a very small part of a much larger reality into an attention-grabbing headline.
The problem with these statements and headlines are that they can quickly become self-fulfilling prophecies, constraining potential nervous investors from entering into the marketplace. I spend much of my time correcting these ‘prophecies-as-truth’ when talking with buyers.
Perhaps I am being naïve but living in Dubai for going on 15 years; I have learned not to underestimate this city.
How often have one's doubts, created by succumbing to negativism and listening to people bad-mouthing the city, been transformed into positive confidence and certainty as the facts have proved the doubters wrong?
Is the Dubai market all that bad?
Let’s review some facts…
From 2004-2008, Dubai’s economy was super-heated by a frontier gold-rush mentality focused on its fledgling and un-legislated real estate market. Investors literally arrived in real estate offices with piles of cash. For those of us who worked in the market through those years, there were so many opportunities to make a lot, I mean A LOT of money by buyers, sellers, and agents.
After the world economic crash in 2008, Dubai put its house in order by creating the Real Estate Regulatory Authority (RERA) to regulate its real estate market, introducing the 4% transfer fee to stop speculators in their tracks, and implementing the UAE central bank’s mortgage rules that insisted buyers must provide a minimum 25% deposit.
If the real estate market today feels slower and less heated than in those crazy few years, then that’s a symptom surely of a normal and stable maturing market. That over-heated market, like anywhere else in the world, is simply unsustainable.
So, when attempting to answer the question - is the Dubai market really that bad? - One needs to know what the city is being compared to. 10-15 years ago? Dubai has moved on. Other economies? Dubai is more than holding its own, even surpassing US projected growth of only 2.3% in 2018.
International Monetary Fund (IMF) data adds further weight here. The 2018 economic growth forecasts for the largest investors in Dubai’s real estate market (excluding GCC countries) - India, United Kingdom, and Pakistan - highlight that Dubai’s forecast of 3.5% growth compares very favourably with the UK (1.5%). Investment interest from the Sub-continent is clearly being spurred on by strong growth in India (7.4%) and Pakistan (5.6%).
I don’t want to bury my head in the sand, but I know where I would rather be in 2018.
Why Dubai? The quality of life, safety, transportation infrastructure, choice of restaurants, leisure, and cultural activities, Emirates Airlines and flydubai taking off from the world’s largest travel hub, cheap finance, shopping galore, rental yields of 6-10%, business opportunities, and of course, the weather…almost always sunny every day.
While there remain some unknowns about the region and some trust issues with the real estate business due to its flawed early history, isn’t working and living in Dubai so much easier than anywhere else in the world right now? I think so.