Economic Crisis Curtails Dubai Building Boom
The current global economic crisis has hit the rapid development in Dubai. In recent years, the Gulf state became a magnet for property investors attracted by the prospect of substantial returns, and has been marketed as a luxury shopping and holiday destination. Now the boom appears to be slowing down, as Government-owned developer Nakheel, one of Dubai’s largest employers, reduces its workforce by 500.
Dubai has become renowned for its high-status developments such as the artificial islands in the shape of palm-trees, one of developer Nakheels projects, but is clearly not immune to the economic slowdown. Nakheel is now delaying work on projects including a hotel on Palm Jumeirah which it is building with US tycoon Donald Trump, and two other island chains, the Waterfront and Palm Jebel Ali.
Only recently, the company marked the opening of the Atlantis hotel on Palm Jumeirah with a massive party, attended by an array of celebrities, at a reported cost of £20 million. The celebrations, accompanied by an extraordinary fireworks display, were astutely described by guest Sir Richard Branson as “the last party of the decade”.
Along with the opening of its new hotel, Nakheel has also taken delivery of the former cruise ship Queen Elizabeth 2, destined for a new life as a floating hotel. Such grand events may suggest that its past successes continue, but a spokesman admitted that it had had to make alterations to its short-term plans in response to current economic conditions.
The company blamed its decision to reduce staff on slow sales due to investors taking a long-term view rather than looking for the rapid gains seen in recent years, and described the redundancies as “a necessity dictated by operational requirements”. It is not the only developer in Dubai to reduce staffing levels, although it has made greater reductions than other companies. Many foreign workers who came to work on such projects now face having to return home, although Nakheel promised them support packages allowing for social, financial, and professional welfare.”
Since it opened up the market to foreign buyers in 2002, Dubai has become a popular destination for real estate speculators in search of rapid gains. Last year, 800,000 British tourists visited the emirate, on target to meet plans to attract 15m tourists to the city-state each year and create a “world capital for the 21st century” Sheikh Mohammed bin Rashid al-Maktoum, its ruler, has created a network of tax incentives and property concessions to prompt the world’s mega-corporations to set up shop there.
“Nakheel’s fortunes are seen as closely connected with those of the emirate and these job cuts are an indisputable sign of the times, said Chintan Mahida, property expert at Nubricks.com, the Dubai property bubble has by no means burst, but it is certainly not continuing to expand and the construction industry is having to take steps to weather the global economic storm.
marhabahome said,
December 17, 2008 @ 11:21 am
You are correct.But I will pick up once world recession is over.
noel said,
December 19, 2008 @ 12:16 am
My personal oppinion … In Dubai and UAE if some investment will be make in essential industry like steel, glass, ciment, etc real estate sector will pick up very fast. That will mean sourses and in same time lot of employers which will need to be acomodate somewhere .. depend of range.. from labour camps to luxury villas. With own production after tourism benefits and friendly laws UAE will remain a favorite place and a business set up hub of world. Land is enough, resurses also … so nothing to worry about. Anyway real estate will remain one from the safetly places to invest and people has to make themself comfortable with returns starting from 10% to 50% yearly; depend of everyone investment kind. And now is time of real speculators. They .. true players in market .. can change this dice game in a chess game.
Property Dubai said,
December 26, 2008 @ 9:34 am
Well said Noel, I think if acted on your suggestion things could really improve.
anu said,
January 4, 2009 @ 9:59 am
Thanks for your article. But in my opinion, Dubai is still a heaven for investors, especially in property sector.
jy said,
January 4, 2009 @ 10:37 pm
Dubai is all hype been there concrete jungle no real beauty just a massive building site with loads of shopping….when youve seen one shop youve seen them all …..nothing to really impress me!!!
Dubai Property Investment said,
January 8, 2009 @ 8:36 am
In a way I agree with anu because there is always an opportunity when there is a dip or fall in the market. But there is also a proper time to enter such a market. You have to look at various factors before do that though.
Generally speaking the economic crisis has surely slowed the construction pace in Dubai.
Noel said,
January 8, 2009 @ 11:26 pm
What happend in last months for Dubai property market was a good experience. Once- those who gambled around realty store and created this artificial boom finished like in a casino session .. has to live the place only with pleasure of be for one moment in touch with a dream. Over night not all we can become rich. (Happy if u get back your starting investment).. And second .. People have to realize that -real estate don’t mean only land and buildings.Between are so many industries and if u cannot control it from inside a small wind in global market can take away your sand castle. (and unlucky at this time was a big storm).
Anyway i’m confident the things will settle down very soon because Dubai have lot of advantages what we cannot get nowhere in the world.. first is low rate of criminality what is really wondering in a place of mixed cultures and religions like this. As foreigners we get all the rights (excluding citizenship which is also normal in a country where locals are minority.. actually is funny but they are foreigners in them own place).Another important thing .. compared with whole world .. is a sress less place. Is a feeling around which come from goverment of care about everything .. as roads network, public transport, city cleaning,etc .. But finally as conclusion .. we don’t have to forget that.. this place was built on sand .. and no one can catch the sand by hands.. we can come here, get a good job, live a good life, assure some financial stabililty for our family and for old ages, hold a property or many properties here, a business, put our best here, enjoy the moments and someday we have to leave because are too many other people outside waiting for a seat in ” paradise city”
The story might continue .. and the show must go on ..and are there so many things to do…
sebaz said,
March 12, 2009 @ 10:09 pm
dear noel,
u dont happen to have something invested there… right
Larry said,
March 15, 2009 @ 3:16 pm
People have to realize that this entire crisis is based in the “fake” expectation of making a huge profit from a few $$ invested in a house or whatever, is impossible to grow unlimited in a limited environment (like it is our planet), how the biggest investors average a 20 to 25% profit along the year, how would anyone hope for this to last forever. Unfortunately the real estate sector will not pick up in the next year, and it will never be the same anymore, people have to learn the lesson, easy come easy goes.
Does somebody remember that after 9/11 Dubai hit the wall? Now this crisis is even worst, because is global.
I am not being negative but only honest, this is my opinion. I have lived in Dubai for long enough to know that the UAE’s is supported in a fake economy; companies were building and borrowing money on the promise of selling properties they have already sold, so to keep it working they need to keep building therefore borrowing, do not tell me that the government did not know anything about it. Why constructing companies avoid workers from returning to theirs countries by keeping passports if they are not paid, is this the way a modern civilized country react to a crisis?
You be my guest.
maso said,
May 31, 2009 @ 3:33 pm
True , you can see the deserted counters in leading departments.
T Y said,
November 19, 2009 @ 6:20 am
Well am very sure that every one here is speaking out of expirience and expiriences.. but the fact remains that dubai do not have that a life time of growth like europe and america not even like some asian countries like china hong kong. japan and many more, (1) the sorounding countries that has influences and eneminities, (2) the general religiors governing, (3) the fake advertising fomulers which will surely boomarang telling poeple of zero tax whereby indirectly extorting more than what tax should have been. (5) zero human right impliment, and finaly zero production, and even do not allow the investors to permanently own the investments with an aduquet visas protections or rite over them self, so by looking at all the carritarials u can agree totaly with me that dubai has been exposed and poeple have leant there leasons, so the goverment is down and out
ivy said,
December 1, 2009 @ 8:47 am
Dubai is a farce , a sham and what have u.It s a market in real estate which had no reason or rhyme and a lot of people and the government seem to be involved in the scam.We have invested in 5 properties where the work has not begun, where the RERA rules entitle us for a full refund,but the developers r not responding to law suits asking for a refund,wch is ridiculous.The developers incl the government builders like Nakheel and Emaar are sitting pretty on our ill gotten money..It s a shame