Might it be time to consider buying Dubai property again? I only ask because the oil price, as I type, is $116 a barrel, and no one thinks that’s absurd. Certainly, it is unlikely to decline against a backdrop of the worst and most widespread unrest in the Middle East in living memory. The madness in Libya – which accounts for two percent of the world’s daily oil consumption – looks set to worsen considerably, and should unrest spread to Saudi Arabia then the common prediction is the oil price will go over $200, comfortably.
While a price that high would cause pain in economies outside the Middle East, it would mean the GCC countries were pulling more than $2bn a day from the ground. They are currently pulling well over a billion dollars a day from it. That money has to go somewhere – it will trickle down through the system and free up the wheels of commerce, encouraging banks to lend and see states, particularly stable ones, injecting massive investment into infrastructure projects.
It is well known the property market is oversupplied in Dubai – a situation the government has taken steps to address. And obviously individual investors overseas, particularly in the West, are not today so flush as they were during the decade-long property boom which culminated in 2007.
But set against that is the fact that Dubai’s image as a Middle East investment opportunity has been, if anything, burnished by recent events. Where today in the region is more attractive as a destination to park cash? Dubai, and the wider UAE, is stable. It is well regulated. And its infrastructure is built. Between $500m and $1bn a day was believed to have been flying out of Egypt during the worst of the upheaval. Similar amounts will also be exiting the other countries in which uprisings have occurred. It would be surprising if much of that cash didn’t wash up in the UAE.
UAE Economy Minister HE Sultan bin Saeed Al Mansouri in this week’s issue of Arabian Business says FDI in the UAE in 2010 was $70bn, and with the IMF predicting economic growth in 2011 of 3.2 percent – and everywhere else in the region suddenly looking a lot less attractive in the short term – who would bet against that figure increasing considerably this year?
Dubai’s economic problems were front page news around the world when they struck. But compared to what is happening across the Arab world today, doesn’t a request for a standstill on debt interest payments seem miniscule?
There are many, of course, who believe property prices in Dubai won’t pick up for between five years and a decade. But then, only three months ago, nobody could have told you Hosni Mubarak would be out of a job by mid-February. Someone’s got to call the bottom of the market soon. And be right.
A friend who works in Bahrain is looking for a job in either the UAE or Qatar. He keeps going for interviews and doing well, but being told to wait. His head hunter says he is no longer only competing against other candidates from the region, as he would have been only six months to a year ago, but rather he is competing with a massive wave of qualified financial sector workers looking to get out of the Western economies in which they work as quickly as possible, before the austerity measures kick in. A sign of the times. Gulf employers are now able to pick and choose like never before.
Damian Reilly is the Editor of Arabian Business. The opinions expressed are his own.