Watch Out, Dubai
The sandcastles are tumbling down. Ann Williams reports
When we thought that the world had dragged itself out from the mire of financial crisis, it occurs to us that we’re still in danger of being sucked back in. In this case, it is the quicksand of the desert that is proving to be a problem as news on Dubai World, the state-owned port operator and real estate holding company based in the Gulf, was believed to have liabilities exceeding US$26 billion.
The United Arab Emirates (UAE) has been known as one of the bright spots amid global recession. Comprising seven emirates including Abu Dhabi and Dubai, it was the latter that proved to be the crown jewel of the Arabian Gulf. And while most of the region’s wealth is based on oil, Dubai built its lavish lifestyle with a property boom as its foundation.
Having said that, well-designed shopping malls, sumptuous villas, fantastic theme park, glorious golden-sand beaches, magnificent marinas, and top-notch hotels and restaurants continue to sprout. And to epitomise the luxurious lifestyle, the much-awaited 160-storey Burj Dubai, the world’s tallest 800m tower worth US$40B, and the celebrity haven Palm Jumeirah are opening soon. Believe it or not, this palm-shaped island is home to more than 30 five-star hotels and thousands of villas attracting motor-racing ace Michael Schumacher, football star David Beckham, and Hollywood A-listers Brad Pitt and Angelina Jolie.
But what is happening now to this dream in the desert? Amongst all the conspicuous consumption, nobody seemed to notice that the developers were finding it more and more difficult to sell their gleaming towers and plush villas. As a result of the credit crunch, property prices began to tumble in early 2009 and have reportedly fallen almost 50 percent. On the other hand, the banks tried to hang on so as not to let the prices go lower. They finally gave up the struggle and the Dubai government had to admit soon that Dubai World required debt restructuring.
Some experts think that the Dubai market has already bottomed out while others fear that it will still fall further. The question now is: can we still hunt for bargains? If a project is already finished, now would be a good time to buy. But remember that you may find it difficult to rent out the property as many expatriates, either fearful of losing their jobs or having already been made redundant, are leaving. Do not buy anything off-plan. If building work has not already been stopped, it is likely to grind to a halt soon. Labour on Dubai’s construction sites is provided by workers from the Indian subcontinent, and many have already been laid off, or have been told not to return to the Gulf after they return home for last month’s Eid Muslim holidays.
It will likely take several years before Dubai sees its property prices reach their former heady heights. For the time being, the Dubai dream seems to be a mirage in the desert haze.
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