Will the Wild West return to the Middle East? The ups and downs – and up again? – of the Dubai economy
This blog first appeared on the Bradford University School of Management blog.
I am sitting in a restaurant working my way through a hearty bowl of spaghetti Bolognaise. Through the window I can see the temperature gauge recording a frosty minus 4. Kids are playing in the snow and adults are going up high on the chairlifts. Brrrr… it makes me cold just to watch them.
But I’ll have to take my jacket off when I go outside. Why? Because I’m in Dubai, in Emirates (shopping) Mall, looking at one of the world’s largest indoor ski slopes.
When I go out it will be at least forty degrees. Is this reality? Do we really need such a huge indoor ski slope in the desert? No, but this was developed when Dubai was very much part of the Wild West in the Middle East!
Dubai’s rapid growth
The commercial history of Dubai is well known. From stretch of desert with fairly old fashioned trading port it transformed itself into a haven of commerciality based on the development of wealth rather than exploitation of oil, which is not plentiful. Dubai represented the lightning speed growth of the last two decades. It was all about the pushing up of property prices which in turn fuelled the boom in property, commercial, retail and leisure development which in turn fuelled paper wealth.
For many years this was very much an unstoppable train or perhaps the period’s answer to the gold rush. There wasn’t gold in “them” hills (or dunes) but there certainly was property (and property values).
Property prices in Dubai were unsustainable
Fast forward to 2008 and we all know what happened. Property prices were unsustainable. Building stopped immediately. Ex patriots left in their droves and Dubai’s Emirate neighbour Abu Dhabi saw the possibilities of real regional control. Dubai is very much a business case which shows that, excuse this metaphor, you can’t build cities on foundations of sand. Upward speculation only works whilst the market is going up.
Is confidence returning to Dubai?
Moving on to 2010 and Dubai seems to be recovering a little confidence. Cranes are moving again albeit in tens rather than hundreds. The new metro system is up and running. Emirates the national airline is producing good numbers and there is generally a feeling that whilst life is not fantastic it is becoming more bearable.
The Dubai Real Estate Blog said at the end of October this year: “Even though the real estate sector of Dubai faced tough time and many people had to bear great losses, still it is viewed as a long term investment option.”
Interestingly from a commercial perspective, many of Dubai’s business leaders are saying that the shakeup, albeit highly dramatic, will probably prove to have been a good thing going forward. There is realism that the future of Dubai can still be a buoyant one and one that is based on it being a financial services, leisure and property hub. The difference is the route to success.