Ethos83

I seem to remember reading a few things about the confidence of British nationals in Shanghai and Singapore when WWII first broke out....

We know how well that worked out for many of them.

Manos De Piedra

I've been hearing a lot of bad things about Dubai lately. I heard that if you're a forgierner it's always your fault and it's right off to jail for you. Is this true?

Shehryar

I agree. The rest of the quote and article is contentious, and IMHO at least, wrong. However, reasonable people could have disagreements over it, so no biggie. These extracts quoted by the OP are just plain silly: Really, Simon? People might differ about the aesthetic merits of the architecture here, but no one can deny the scale of what's already been achieved. You could love some the architecture, hate the rest, but you cannot deny the sheer scale - it would have been unthinkable ten years ago, or even in 2002 - they have changed the face of a city, and with it, of the region. For better or for worse, time will tell...

Simon Jenkins is the same guy who has greeted every new building in London (Swiss Re, More London, Mayor's office, Canary Wharf) with cries of how grotesque/ugly they are and how we will all hate it - even though quite a few of the new buildings are spectacular. Firstly, profits of oil and 'western aid' are not "laundered" - they are both perfectly legal. Secondly, a significant portion of the speculative investments into Dubai, particularly in Real Estate, have been by Indians, Pakistanis and Iranians - businessmen who had been looking for a safe haven and a good short-term investment for their money in the region. As the bubble burst, those people have left. Hence, nothing to do with "drugs" or "arms" - had it been primarily those two, the money would still be here as those people wouldn't care about returns. However, the investors here were looking to make a quick buck for their legal funds and hence have now disappeared. Thirdly..what Western Aid? In the UAE?

What an idiot.

admon

I really can't be arsed to point out the faults in your statement because its blatantly obvious you haven't got a clue, but I'll say this..

If all the investors here were genuine ones, looking to make a profit, then why were apartments, villas, floors, blocks, left empty, for long periods of time during the 'boom'.
And please don't say that it made them easier for investors to flip, as full occupation of rent payers would make them more valuable..

Answers on a postcard to Sheyryar please..

Shehryar

Thank you for the politeness...but really, you are far too kind :-)

I don't think they were 'genuine' investors of the kind we have in the UK, who are looking for a low-to-average rental yields and modest appreciations. The investors here were looking to make a 'quick buck', as suggested in my previous post ("a good short-term investment"). Hence the speculation, the property flipping and the over-inflated bubble.

Were investors deliberately leaving their properties vacant when they could have rented them out and made money? I don't know if that was a widespread phenomenon. You seem to think it was, so I'll take your word for it - that would indicate they were not looking for returns on their investment - simply for a 'safe haven' for their (ill-gotten?) money. If that was the case, why has demand suddenly dried up?

admon

It was a widespread phenomenon, witnessed by various over the last 3 years.

Why has demand dried up?
Come on, common sense. If they want to lose the money they may as well burn it on a bonfire.
With no prospects of any capital gain in the next 5-10 years, or ever, it's a no brainer..

Can I borrow your rose tinted glasses please?

Shehryar

I agree - but that was my whole point. That property demand here was speculative and most were looking for extravagant short-term returns from a highly leveraged base - nothing to do with "money laundering", just greed.
As those crazy and silly returns have evaporated, so has the demand. If it was all money laundering, the demand would still be here.

If I had those, I'd be out there buying property right now... :-)

bimcnorth

That´s just human luck or lack of it..Shanghai and Singapore survived and have staged a remarkable growth despite some setbacks because they are trading and financial hubs.
The construction/property business is a secondary effect.

Trade is still the prime mover.

Ethos83

Sure, but you can't guarantee the next fifty years is going to be smooth for Dubai. If you were an expat with investments in Shanghai in 1939, or Moscow in 1914, you got seriously *****ed.

Waiting for the city to recover fifty or eighty years down the road doesn't mean much since odds are you'll be dead before that.

Dubai has a comparative advantage in trade for the region, but Dubai was the first to make its move. Now Bahrain, Qatar and even Saudi are jumping on the bandwagons with their own artificial ports, financing centres and manufacturing sources, all employing the same cheap labour from SE Asia. I don't think it's unrealistic to carefully assume Dubai has a decent and long-term future (assuming the Middle East doesn't blow up at some point), but the competition for the same goods and services Dubai offers is going to be more intense in the future.

Shehryar

That's a good post and you raise some valid points. Dubai is facing competition as the trade/business hub of the region, but I don't think its that serious, as yet. Firstly, because Dubai has a >20 years head-start - Jebel Ali was started way back in the late 1970s, and there is a huge amount of infrastructure (port, container terminals, storage, roads) and human/financial capital available in Dubai that the competitors don't have. Even before Jebel Ali, dhows had been sailing up the creek (!) and back/forth from places like Basra and Bombay for decades - there isn't a local equivalent to any of that. Secondly, the competitors have serious issues of their own - Saudi is not the best place to do business in if you are a non-Saudi or catering for a non-Saudi market, and that won't change soon. Bahrain has significant political issues plus it is tiny and thus cannot really grow beyond a certain point. Qatar hasn't really focused on logistics/trade as much as it has on petrochemicals, drilling, LPG and of all things, real estate!

bimcnorth

Ah, but there´s a difference between smooth and further expansion. Shanghai expanded quickly even during communist rule, Hong Kong almost exploded as they provided trade to China..

As for the possibility of another gulf city overtaking Dubai as the main trading, manufacturing and finance centre I think you´ll find that its rather unlikely for a number of reasons.


First of all Dubai got the structural support of being part of the second biggest economy in the arab world and will benefit hugely from that.

Secondly any other city in the region must make similar investments that Dubai have done and few are willing to take the risk or even got the means.

Thirdly the Saudis are not going to expand trade facilities considerably in the volatile NE part of the country but focus on the western red sea area where their industrial centres are.
Thus limiting any exposure to future troubles like the Iran/Hormuz scenario.


Add that Bahrain is on the verge of civil unrest and lack financial resources you will find that Doha is perhaps the only possible rival sometime in the future but that would need enormous investments while Dubai is cementing its position day by day.

W10

And the award for furthest stretch of the imagination to try and justify a fairly weak example is......

W10

While Jenkins' article is pretentious in the extreme...quoting Shelley poems about glorious Egyptian dynasties...

It is fairly common knowledge that Dubai has/is a haven for the less desireable elements of this world. And plenty of dirty money passes through here. Remember that Dubai banks held the accounts for the 9/11 chaps...(we just don't mention it here) and that up until very recently, you could buy apartment buildings for cash with little or no paper trail.

Jammy_Dodgers

Agreed,
It is well known that entire floors were bought for cash and left to sit empty.
Dubai has long been a favourite destination for dirty cash

IndieG

I can tell you that a lot of floors sit empty simply because they haven't been sold (yep, still with developers who were hoping to cash in when prices went up another 200%)....and there are many borrowers who have bought entire floors/buildings and are currently in default...