written by Andy
on Friday, November 21, 2008
A few months ago I wrote a piece comparing the pros and cons of living and working in Dubai - the booming city in the Middle East. Perceptions were that expats could go there and earn vast sums of money while living in luxury. Off course, the reality was that living in a government driven expansionary city has its fair share of challenges. Overall though the decision really came down to your situation in life and what you wanted. If you were focused on earning as much as possible then I would say Dubai is was the place to be, however with a family other factors needed consideration. But how times have changed as the winds of economic fortune reversed.
Due to the global economic crisis and the fading fortunes of the oil rich Arab states, things have changed dramatically in the whole region. For those looking to move to Dubai in order to earn the big bucks, the time to do so may have passed you by. With a slowing economy and globally tight credit markets, Dubai’s economy could be in for one hell of a crash given its significant dependence on its property market. The WSJ reported that the city's six-year property boom appears finally to be over, with asking prices for some homes here falling as much as 19% in October from the previous month, according to a well regarded HSBC survey. The survey provided the first quantitative evidence of a significant correction in Dubai, claims that the government is still denying. The bank warned of "protracted weakness should lending practices remain in place for awhile." Banks have significantly tightened lending—requiring bigger down-payments and increasing mortgage rates, which increased by as much as 200 basis points.
With the housing boom appearing to have come to an end, fears about Dubai's ability to repay its ballooning debt have begun to surface. The city-state doesn't have the large reserves of oil that many of its Middle East neighbors enjoy. Instead, Dubai has financed its economic diversification in recent years with massive international borrowing by the government and by government-controlled corporations. Dubai officials have said repeatedly in recent weeks that government finances are sound. Analysts say the oil-rich federal government of the United Arab Emirates, based in Abu Dhabi, would lend a lifeline in a crisis. However even that may not be enough to meet its massive obligations. This has been reflected in the local stock exchange which has taken a pounding, down 62.7% year-to-date, driven down by property and financial shares.
With a rapidly slowing economy moving to Dubai is definitely more of a risk now. So weigh up your options carefully if you are thinking of moving because all that glitters is not gold.
Create a Free Monster Account and Post Your Resume Now!
Related Posts:
- Working and Living in Dubai - Is all that glitters gold
- American Employees: Cheap to Fire
- The alphabet soup of Immigration terminology
November 20, 2008 10:42 AM
Still, this is a great place to do business. For entrepreneurs, falling housing prices are a good thing. It has become too expensive to hire skilled workers.
Good businesses to buy are based on population growth- real estate values will drop, transactions will slow to a halt (along with hucksterism), but the space being built under construction (70mm sq feet commercial and 100k + residential units) will be occupied at a much lower price.
If you're buying a business in Dubai, check out my company: www.capitalstreet.net, a marketplace for businesses here.
Another good thing for buyers right now is valuations are low and seller financing is available.
November 21, 2008 8:41 AM
Dubai is certainly having its share of economic issues related to real estate as well. Since July 1, Dubai’s real estate index has shed a stunning 75%. Emaar, the largest developer in the region, has fallen more than 57% in the past seven trading days alone! When even the king’s newspapers start using words like “battered” and “thrashed,” you know you’re in trouble.
November 24, 2008 9:34 AM
- Thanks for the comments Steve. Valuations are low on a historical basis, but in the new economy we are now in they are still relatively high. For now it is better to play it safe until things stabalize.
- CP, interesting article, things look worse than I thought. I know a few years ago I was thinking of moving to Dubai, but now I am glad to be here.
February 12, 2009 2:48 PM
Obviously Not. See this recent NY times article : http://www.nytimes.com/2009/02/12/world/middleeast/12dubai.html?_r=1
With Dubai’s economy in free fall, newspapers have reported that more than 3,000 cars sit abandoned in the parking lot at the Dubai Airport, left by fleeing, debt-ridden foreigners (who could in fact be imprisoned if they failed to pay their bills). Some are said to have maxed-out credit cards inside and notes of apology taped to the windshield.
The government says the real number is much lower. But the stories contain at least a grain of truth: jobless people here lose their work visas and then must leave the country within a month. That in turn reduces spending, creates housing vacancies and lowers real estate prices, in a downward spiral that has left parts of Dubai — once hailed as the economic superpower of the Middle East — looking like a ghost town.
No one knows how bad things have become, though it is clear that tens of thousands have left, real estate prices have crashed and scores of Dubai’s major construction projects have been suspended or canceled. But with the government unwilling to provide data, rumors are bound to flourish, damaging confidence and further undermining the economy.
Instead of moving toward greater transparency, the emirates seem to be moving in the other direction. A new draft media law would make it a crime to damage the country’s reputation or economy, punishable by fines of up to 1 million dirhams (about $272,000). Some say it is already having a chilling effect on reporting about the crisis.
Last month, local newspapers reported that Dubai was canceling 1,500 work visas every day, citing unnamed government officials. Asked about the number, Humaid bin Dimas, a spokesman for Dubai’s Labor Ministry, said he would not confirm or deny it and refused to comment further. Some say the true figure is much higher.
“Before, so many of us were living a good life here,” Mr. Thiab said. “Now we cannot pay our loans. We are all just sleeping, smoking, drinking coffee and having headaches because of the situation.”