Saturday, 28 March 2009

Dubai sets its own rules as foreigners flee hard times

An article from the other side of the world, New Zealand Herald Saturday March 28 '09.
Dubai is still in the stratosphere of the most-expensive cities but it's no longer a property feeding frenzy.

To someone not used to its grandiose ways, Dubai's downsizing might not look so bad.

Construction cranes still tower over the city, though a bit fewer. Hummers still crowd the highways, though some now have "for sale" signs taped to their tinted windows.

But one brief phrase shows how heavy a blow Dubai has suffered from the world economic crisis.
The words "leaving Dubai, must sell" now dot classified ads as departing foreign workers try to dump furniture, cars and kitchen appliances. Look further, and once red-hot office space and apartments stand empty.

Dubai's self-crafted dynamo image - big profits and bigger dreams - has taken a direct hit. First, the economic freefall quieted Dubai's white-hot growth.

Then, it took another swipe at the boomtown's swagger: setting off an exodus of workers that could cut the population by at least 5 per cent by some estimates.

Dubai's leadership has tried hard to portray the shifting fortunes as just a temporary pause in the city-state's relentless expansion. Others see a mixed blessing - a chance to simply catch their breath.

For many who endured years of living with Dubai's high-rolling rules, the slowdown offers a moment of reflection after a decade of watching sand dunes give way to skyscrapers.

Foreigners, who outnumber Emirati Arabs 8-to-1, are seeing the first cooldown of Dubai's sky-high cost of living in years.

Some local Arab leaders, meanwhile, are finding the downturn is an opportunity to voice a cultural claim to their country - where they feel traditional Arab values have been steamrolled by a Western-friendly lifestyle of nightlife, bars and sexual permissiveness.

In one sign of the evolving priorities, Dubai has launched a new public decency decree that sets guidelines for conduct in public, particularly frowning on risque clothing.

Mustafa Alani at Gulf Research Centre describes the humbling of Dubai as "an attitude adjustment that covers everything from plans for huge projects to the small daily interactions in life".

Michal Mroz, a real estate broker whose office overlooks new apartment towers with massive "For Rent" signs, said: "During the boom years, the Dubai way was: 'Take it or leave it. There will always be someone willing to pay the price'. Now people are leaving it."

Residents are finding that excesses they once took as a fact of Dubai life have now changed. A year ago, landlords demanded - and often got - a year's rent in advance.

Today, renters have the leverage and a standard month-by-month payment is possible.
Real estate prices could drop by up to 60 per cent by the end of the year compared with the peak in mid-2008, a report by the Dubai-based Shuaa Capital financial services group said. That keeps Dubai in the stratosphere of most-expensive cities - with US$5000 ($8660)-a-month rents for two-bedroom apartments still out there - but it's no longer a property feeding frenzy.

Proleads, a market research firm, said in a February report that nearly 53 per cent of the Emirates' construction projects have been put on hold and more may be frozen this year.
At the opening of an international property show last week in Dubai, the show's organiser, Dawood Al Shirawi, even used a word that many Dubai officials have scrupulously avoided: recession. "This was a big challenge to organise this exhibition during recession times," he was quoted as saying.

The same belt-tightening mood is found almost anywhere. A report last week by the Jones Lang LaSalle consultants showed the supply of empty office space in Dubai has doubled to 16 per cent over the past six months. Standard & Poor's this month cut the credit ratings of six Dubai government-backed entities and a leading property developer. Other nearby cities, too, are cooling off after years of sizzling growth. But Dubai's main rivals - Abu Dhabi and Qatar's capital Doha - have deeper pockets with vast oil reserves.

"Dubai has been the poster boy for globalisation and the free flow of globalised capital," said Mahdi Mattar, author of the Shuaa Capital report. "It built a reputation as a city run like a company. You see what happens to companies when globalised capitalism begins to fall apart."

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