In the many years I have travelled to Dubai, I have always felt that the place was a bit like Marmite. You either love it, or hate it … few seem indifferent about the place. 4/5 years ago I certainly loved Dubai, every single person in the Emirate was excited about its future, the service was exceptional, the expats well-educated and grateful for the opportunity to be working there. Taxi drivers would eagerly give you a guided tour of the sites on the way from the airport to your hotel and remind you that all this was desert just a few years ago. Did you know they were building a man-made island in the shape of a palm tree? Anything seemed possible!
What they have achieved in Dubai is incredible, but they let things get out of hand. They grew complacent, allowing too many projects, too fast with far too optimistic projections and pricing. Dubai changed from a place with incredible service to one with a reputation for lousy service, smelly taxi drivers and corrupt businessmen.
I bought a place in Dubai – it was actually one of my best investments – but when prices started getting silly I felt uncomfortable and sold. I sold at a price per square meter that is the same in the most expensive parts of the Cote d’Azur. Dubai was great, but it certainly was not the South of France! The other reason I sold was emotional, I no longer felt like Dubai was somewhere I wanted to live. I felt that I can’t be alone in feeling that Dubai had become a victim of its own success.
So what went wrong? Well, the market was over-stimulated and under-regulated. Developers kept ratcheting up the prices without stopping to think ‘will anyone other than speculators be willing to pay this’. Everyone got carried away with the success and nearly everyone that went there went to make a fast buck. It was a classic case of when everyone including the postman thinks it is a good idea to invest, you’re not only in a bubble but you really need to sell fast. I had Cluttons value my property and their report said that 70% of the people buying were buying to speculate!
As fast as they go up, they come back down with a bump. The property market has halved in value and speculators abandoned ship as fast as possible. When I visited in April 2009 the property magazine was literally 1/6th the size it was in May 2008 … and most of that was Abu Dhabi property advertisements! The chain reaction has now caught out some of Dubai’s own sovereign developers that didn’t think about any scenario other than constant growth. Suddenly their lavish spending on new developments and investments abroad look like schoolboy errors, resulting in several sacrificial lambs being fired in disgrace … only to be replaced by members of the royal family. Hopefully they have sense to hire some of the best advisers money can buy, rather than assume they can do a better job with no experience.
So Dubai has inevitably been bailed out by Abu Dhabi, no doubt in return for Dubai handing over some of their prize assets in secret. In my opinion Dubai has already become a far nicer place (less traffic, less planned construction, etc.) and will learn from its painful mistake. Dubai is, and will always be on the map … just don’t expect property prices to rise 100% in 4 years again!