This is a tough one to write, not tough to make conclusions about, nor tough to find material to support those conclusions, in fact quite the opposite; the tough bit is being brutal in what we choose to include. One could easily write a novel on the trials and tribulations of the Dubai property market.
It really does look like the Dubai property market is heading into a sustainable recovery, which has grown out of 2011.
Dubai GDP is thought to have grown by 3% year on year, which is a massive improvement on the previous year. This is because of strong performances in aviation, hospitality, retailing, oil prices and even real estate, fuelled by the Arab Spring.
As has been seen in other countries, including Turkey; the Arab Spring made most of the Arab world inaccessible for tourism and investment, which led to tourists who would normally have holidayed in any of those locations looking for a safe place where they could enjoy a similar holiday experience, and Dubai was one of the places that ticked those boxes.
Surging Oil Revenues
The surge in oil prices as a result of the Arab Spring is also a major part of the reason for Dubai's strong 2011 performance. In November Ghaith Al Ghaith CEO of FlyDubai said at the Dubai Air show that the surprise was that oil prices not only jumped above $100-a-barrel but stayed at these levels for longer than ever before. At the time WTI crude was heading for $100 a barrel, while Brent crude had been way above $100 all year.
This meant surging oil revenues, but because of the Arab Spring these revenues were being shared with far fewer countries, and Dubai was one of them. As a result, in the words of Arabian Money: "the hoards of multinational trading empires based in Dubai have had a very good 2011 or at least better than the pessimists expected at the start of the year".
Hospitality, Aviation and Safe-Havenism
As stated above, the Arab Spring led millions of Muslims and Arabs who had previously holidayed in affected countries to look elsewhere. This led to strong growth in Dubai's tourism, hospitality and aviation sectors. But it wasn't just temporary growth. Many of the countries affected by the Arab Spring still have dark clouds hanging over them.
Of course Syria has far worse than dark clouds and we can all only hope for an expedited end to the bloodshed there.
In Libya the fighting seems to have come to a permanent end, or as close to permanent as it gets in the Middle East, but the rebuilding of the country and repairing of confidence will take many years. In Egypt protests are still going on to remove the military from government, the stark warning on the Foreign and Commonwealth Office reads: "British nationals should avoid all crowds and demonstrations". In both Egypt and Libya the revolutions were successful, but in most they weren't and protests are still ongoing.
Thus tourists and investors continue to look for safe places to holiday and invest, which is having a lasting effect on the Dubai economy. In January a record 4.85 million passengers travelled through the Dubai international airport.
Dubai's GDP is expected to grow between 4.5 and five per cent in 2012, Shaikh Ahmad Bin Saeed Al Maktoum, Chairman of the Dubai Supreme Fiscal Committee, said at the Dubai Economic Outlook 2012 conference yesterday.
"In spite of the difficulties Dubai has experienced, particularly in 2009 and early 2010, its strategy of creating new opportunities through diversification has succeeded in bringing about economic prosperity and stability," he said.
At the same time, much of the stock that was still in construction, or due to be constructed when the market crashed in 2008 has now been completed and is available for sale and rent at lower prices.
For the last 4 years we have discussed the amount of stock due to come online as a negative for adding to the oversupply problem. But now the economy is growing again, and we have Dubai perceived as a safe haven, not to mention its attributes as one of the most modern and technologically advanced places to do business not only in the region, but in the world. All this points to increasing investment and demand for Dubai property, so this stock could become a blessing as it will allow Dubai to grow unhindered -- like buying shoes a size bigger because you know the child will grow into them.
- Tuesday 28 February 2012