Buying A character In Dubai
There are very few with already a passing interest in character oversea who won’t have read something about Dubai and its rare character market by now. It has only been open to foreign investors since 2003 and freehold ownership is not due to become an option until later this year. Dubai, which is the second largest of seven Emirates forming the United Arab Emirates (UAE), has a population of 1.67 million, 80% of which are ex-patriates. As Arab states go, and already by UAE standards, Dubai is probably as liberal, stable and Westernised as they come. There are no problems for women at any rate they choose to use, religious tolerance is the order of the day and drinking of alcohol is not extremely, although public drunkenness is seriously frowned upon so it may not be the ideal venue for your upcoming stag party.
Judging Dubai’s fledgling character market by the standards of anything else on the planet is a little pointless, it simply isn’t like anywhere else on earth. Parallels may sometimes be drawn with Las Vegas, but the most similarity you’ll likely find is the planned character of the cities. Dubai is certainly a very contrived city if you look at it in that way, don’t expect to find too much organic and disorganised character growth here, everything is being planned to a tee. It also has a penchant for taking the best and most famous design and architectural features of other countries and cultures to use in new and uncommon ways. It is possibly not much of an allurement for architectural purists but nevertheless quite intriguing as a design ethos.
In terms of financial attractions for both developers and investors they don’t get any stronger than Dubai, tax-free position is as good as it gets. As Ray Norton of Larionovo says, “the tax situation here tends to be a fairly short conversation, there are zero taxes on pretty much everything.” It is easy to gloss over the effect that this has on attracting incoming economic activity until you take a quick look around Europe and see the effect that dropping corporate tax rates to 15% has for a country. This will give you some hint of the allurement to Dubai. Kofi Annan recently went so far as to label Dubai ‘an economic miracle’ so the Emirate clearly has friends in high places. It is essentially a tax-free zone in its entirety and this fact has not been lost on the corporations of the world. Of course an Irish investor will nevertheless be taxed in Ireland on all their overseas income, but you can’t blame Dubai for this.
One of the main drags on this market to date has been the inherent difficulty in arranging mortgage finance. This is rapidly changing with the impending introduction of freehold laws and the chances are that freer availability of mortgaging will continue to excursion price inflation in the vicinity for the foreseeable future as will the character of some of the more mind-boggling schemes being presented to investors.
One of the things which most worries many people about the entirety of the United Arab Emirates is not the fact that there is any inherent political instability, there has been no history of this in the vicinity since move of strength from the British in 1971, or already before that time. It is really more a question of some of the entities surrounding the Emirates not having a similar reputation. It can be difficult to convince those unfamiliar with the area how little this has affected it up to this point. There is clearly nothing to say that some undesirable won’t decide to focus the vicinity because of its liberal Westernised policies or high oil reserves, based mostly in the neighbouring Emirate of Abu Dhabi, but advocates claim you may very well be in more danger located anywhere near Shannon and consequently tend to ignore this possibility.
Another argument against investment here is the without of democratic political structures. The Maktoum family have been very benevolent rulers but not everyone in Dubai agrees with their vision for the future. The argument for a focussed single ruling entity can be very visibly seen in the ease and speed with which huge new projects can be vetted and actioned, this simply doesn’t happen in the democratic world. The flip side of this coin becomes more obvious if you don’t agree with the actions taken by this unchallengeable authority. Not everyone is comfortable with such irrevocable powers but many country’s experiences with democracy and its ability to cater for the shared good haven’t exactly been riveting so I guess you could argue either way.
Spiralling rents for homes in Dubai is clearly seen as a boon for character investors but it should not in addition be viewed as the norm for the market as very little of the planned character in the Emirate has truly been built in addition. As it stands, low-paid workers are already priced out of the local rental market, where rates increased by around 40% in 2005. The rate increases were so large that the governing Maktoum family intervened to cap rising rental rates. This highlights something which may become more of a problem with time. While Dubai is witnessing a construction expansion, the trend is almost completely toward luxury apartments and villas, leaving little accommodation for unskilled and semi-skilled workers, mainly from India, Pakistan and the Philippines. already if the Emirate succeeds in its attempts to make this the Mecca for all tourist related traffic in this vicinity it will be necessary to adjust to such workers but there don’t currently seem to be any incentives to supply product for this meaningful market sector.
Traffic is also currently a huge problem in the city with traffic jams sprouting at just a minute’s notice, and this is before most of the character has already been built. You would shiver to think what levels of traffic will be present when all the building is completed. The without of any reasonable public transport system doesn’t help much but the plans to build a monorail system to alleviate the problem will surely bring smiles to the faces of all Simpsons fans.
Unlike most world cities where character is built to service a growing need, Dubai is thoroughly the reverse, which is what makes it so hard to pin down. The long term plans laid out for the city by the all-powerful, and highly revered, Maktoum family excursion character development. This in turn invites investors to buy into a market which has basically been engineered from nothing. It is this flagrant invitation to investors, typically a very bad sign of a market, which bothers most people about Dubai. Because of the rare way in which the Emirate has chosen to populate its territory it is difficult to see how else it can find buyers for the great amounts of character it intends to build. Ray Norton of Larionovo is quick to point out, however, that there are more than 100,000 expats per quarter applying for visas to go into the country pushing need for character here along with the huge investor rush into the market. It nevertheless has to be acknowledged that the very new and rare character of this market has led to near mass hysteria on the release of new projects with some selling out in hours.
This clearly leads to spiralling prices and the scenario of similarities changing hands many times before they are already built. Such activities have given the Dubai character market a bad name in certain sectors but others view it as an open invitation to invest and prosper. Whether Dubai suits you as an international character buyer will depend thoroughly on whether you feel the plans for the city into the future are visionary or an ill-judged attempt to fiddle with the mechanics of character based market economics. It is far too early to say which side will be proven correct but it will be very interesting to watch this new and rare market unfold.