Over the past five years as real estate prices here at home have risen to epic levels and then precipitously fell many people in the United States were unaware of a similar meteoric increase in construction and rise in real estate prices in the Middle East. No one place exemplifies the great world wide real estate bubble of the 2000’s then the rise and soon to fall of Dubai, an invented city, located in United Arab Emirates. Over the past eight years Dubai has sprung up office buildings, apartment complexes, resorts and towers out of the desert sands like a captive genie sprung from its bottle.
The rise of Dubai has been fed with foreign investments, easy lending policies and more than anything else, the expensive price of oil that filled Middle Eastern coffers with Euros, US dollars and gold. The Financial Times recently added that the “Expansion of the market has been driven by the government, which has allocated 10 per cent of expenditure to infrastructure and introduced regulatory reforms allowing foreigners to own property.” Now lenders are cutting back on their lending and foreign investors are shying away while oil prices have plummeted from a high of close to $200.00 to around $50.00 the future for Dubai real estate looks especially grim.
A few of the recent building projects defy all common sense including the world’s largest indoor ski resort. The resort is located in a city that regularly sees temperatures reach triple digits. According to The Heights, “Developers and builders have called for everything bigger and bolder to build the world’s tallest skyscraper. They are also planning to build the world’s most expensive airport and largest shopping mall.” As if these projects weren’t enough, construction has begun on a series of islands shaped like palm trees that can be seen from space. A lot of this construction, according to industry insiders, was instituted to make Dubai the premiere tourist destination of the Middle East. In fact this has been one of the stated goals of the UAE government as they have poured oil money into the construction and tourism industries over recent years.
Meanwhile the government of UAE appears to remain optimistic about the long term prospects of the real estate market in Dubai, on December, 3 one spokesman was outright bullish while stating “The future of Dubai and UAE real estate will be more successful and solid than in previous years, due to lessons learned during the economic crash.” Unfortunately, the crash may have just begun for the Dubai real estate market. One wonders if the magical Genie has slipped back into its bottle for another thousand years, after granting its customary three wishes, leaving its owners now just hoping.