Dubai: Property prices have quadrupled in Gulf Arab countries due to surging demand for housing and office space created by economic growth and windfall revenues from a 5-fold increase in oil prices since 2002. Dubai, the Gulf commercial hub, has already set an annual rent cap of 5% for 2008, tighter than last year's 7% cap and the 15% ceiling of 2006.
Jones Lang LaSalle expects a supply surplus in Dubai between 2010 and 2012. This adjusts the global real estate investor's previous forecast that supply would surpass demand between 2007 and 2009.
Real estate prices and rents in the Gulf Arab region, especially Dubai are most likely to rise by up to 20% in 2008, due to higher labor and construction costs and delivery delays, says market analyst, Jones Lang LaSalle.
Blair Hagkull, Regional Managing Director, Jones Lang LaSalle in Dubai, said, "With the delays in delivery, the specter of huge supply continues to be delayed and you see greater demand... there will also be an increase in labor and construction costs and land prices".
Of 57,000 residential units expected in Dubai in 2007, less than 20% were delivered by September, Cairo-based investment bank EFG-Hermes said in a report that month. It said then it expected a rise of 5-10% in property prices in 2008.
Showing posts with label dubai outlook. Show all posts
Showing posts with label dubai outlook. Show all posts
Tuesday, 19 February 2008
Tuesday, 29 January 2008
Why Dubai is getting too crowded for comfort
Clare Aggarwal is a “professional landlord and investor”, according to The Mail on Sunday. Her latest purchase was a £174,000 two-bedroom flat in Dubai – “my first venture abroad”. The flat doesn’t actually exist yet – it’s just one of 504 apartments being built in The Torch, a 74-storey building on Dubai Marina, and is due for completion in March 2008. Nonetheless, according to Aggarwal, Dubai’s increasingly foreigner-friendly property laws – foreigners can buy freeholds, although only in special zones – have “added another 15% to the apartment’s value and it will hopefully have doubled when it’s all done and dusted”. “I am told the rental income is between 12% and 15% per annum,” she says.
Readers who are on the ball may be starting to wonder a little – how can someone be so sure of rental income for a flat that won’t actually be inhabitable until more than a year from now? Perhaps they won’t then be surprised to learn about how Ms Aggarwal found the property – “I saw an advert in the paper, looked into it and put my money down”. She has, of course, actually been to Dubai, “on family holidays six or seven times”.
But not in the past two years – “I couldn’t afford the flights”.
Ms Aggarwal is far from being the only Briton staking vast sums of money on a building site she can’t even afford to visit. Despite Dubai’s “congested, half-finished roads” and the frequent hazy smogs produced by a “combination of pollution, sand and building dust”, the country has proved popular with other amateur landlords. According to Adam Price of Dubai Select, the UK firm selling sites in The Torch as well as two other huge developments, 75% of buyers are middle-aged British people.
And more developments are being built all the time. It seems the entire city is a building site – “there are more than 250 towers in the Jumeirah Beach and Dubai Marina area alone”, says The Mail on Sunday’s Sarah Hartley, while “billions” are being spent on hundreds of “residential supertowers” in the same mould as The Torch.
It’s perhaps no surprise that property speculators have been attracted to Dubai – figures from Asian banking group Standard Chartered suggest that prices doubled in the three years to the end of 2005. But the bad news for Ms Aggarwal and her fellow investors is that the bank believes “we are getting close to a peak in residential property prices”. In fact, it seems that prices may be falling already. The group’s residential property market index reports that prices have risen by nearly 19% in the year to October.
But that masks huge volatility in the data as well as regional variations.
In five of the last eight months, the index suggested that prices had actually fallen. And in the New Dubai area, which includes the much-vaunted palm-shaped Jumeirah Beach development, prices were down 5% in the year to September.
It’s unlikely to stop here. “Supply is set to grow rapidly in 2007, outstripping demand growth,” says Standard Chartered, quoting data from Egyptian investment bank Prime Group. “Taking into account delays in the delivery of properties, 52,000 and 63,000 properties will be delivered in 2007 and 2008 respectively.”
The bank continues: “Given a reasonable assumption of 7% population growth for the emirate, it suggests this will lead to an excess supply of around 6,000 units in 2007 and 33,000 units in 2008.”
The bank reckons that prices will fall by 20% to 30% over the next two to three years – but that could well be optimistic. Dubai has already seen what can happen when asset prices get wildly over-inflated by rampant speculation – earlier this year the country’s stockmarket dived by 65%. Speculators scrambled for the exits as stockmarkets across the world were rattled by US inflation fears and the threat of falling global liquidity.
It seems more than likely that the same could happen in its real-estate market.When Ms Aggarwal and her fellow overseas investors realise that their off-plan high-rise in the sun could well be worth less than they paid for it by the time it’s actually been built, there will be a rush to offload. As Sarah Hartley puts it, “With a fledgling resale market, it remains to be seen whether demand will ever meet this enormous supply.” We think we know the answer already.
Readers who are on the ball may be starting to wonder a little – how can someone be so sure of rental income for a flat that won’t actually be inhabitable until more than a year from now? Perhaps they won’t then be surprised to learn about how Ms Aggarwal found the property – “I saw an advert in the paper, looked into it and put my money down”. She has, of course, actually been to Dubai, “on family holidays six or seven times”.
But not in the past two years – “I couldn’t afford the flights”.
Ms Aggarwal is far from being the only Briton staking vast sums of money on a building site she can’t even afford to visit. Despite Dubai’s “congested, half-finished roads” and the frequent hazy smogs produced by a “combination of pollution, sand and building dust”, the country has proved popular with other amateur landlords. According to Adam Price of Dubai Select, the UK firm selling sites in The Torch as well as two other huge developments, 75% of buyers are middle-aged British people.
And more developments are being built all the time. It seems the entire city is a building site – “there are more than 250 towers in the Jumeirah Beach and Dubai Marina area alone”, says The Mail on Sunday’s Sarah Hartley, while “billions” are being spent on hundreds of “residential supertowers” in the same mould as The Torch.
It’s perhaps no surprise that property speculators have been attracted to Dubai – figures from Asian banking group Standard Chartered suggest that prices doubled in the three years to the end of 2005. But the bad news for Ms Aggarwal and her fellow investors is that the bank believes “we are getting close to a peak in residential property prices”. In fact, it seems that prices may be falling already. The group’s residential property market index reports that prices have risen by nearly 19% in the year to October.
But that masks huge volatility in the data as well as regional variations.
In five of the last eight months, the index suggested that prices had actually fallen. And in the New Dubai area, which includes the much-vaunted palm-shaped Jumeirah Beach development, prices were down 5% in the year to September.
It’s unlikely to stop here. “Supply is set to grow rapidly in 2007, outstripping demand growth,” says Standard Chartered, quoting data from Egyptian investment bank Prime Group. “Taking into account delays in the delivery of properties, 52,000 and 63,000 properties will be delivered in 2007 and 2008 respectively.”
The bank continues: “Given a reasonable assumption of 7% population growth for the emirate, it suggests this will lead to an excess supply of around 6,000 units in 2007 and 33,000 units in 2008.”
The bank reckons that prices will fall by 20% to 30% over the next two to three years – but that could well be optimistic. Dubai has already seen what can happen when asset prices get wildly over-inflated by rampant speculation – earlier this year the country’s stockmarket dived by 65%. Speculators scrambled for the exits as stockmarkets across the world were rattled by US inflation fears and the threat of falling global liquidity.
It seems more than likely that the same could happen in its real-estate market.When Ms Aggarwal and her fellow overseas investors realise that their off-plan high-rise in the sun could well be worth less than they paid for it by the time it’s actually been built, there will be a rush to offload. As Sarah Hartley puts it, “With a fledgling resale market, it remains to be seen whether demand will ever meet this enormous supply.” We think we know the answer already.
Omniyat CEO dismisses Dubai property ‘bubble’
Omniyat Holdings CEO Mehdi Amjad has dismissed recent speculation regarding the bursting of the Dubai real estate ‘bubble'.
"There is no bubble and I don't believe markets will see a sharp bust. We keep hearing that the supply and demand will be realised in 2008 or 2009, but while I believe that demand will become less extreme, it will continue to outweigh supply."
Amjad believes that a lessening in demand will be healthy for sustainability in the long-term.
"If Dubai has one or two years of inflation, then that's okay. But a decade of inflation is unhealthy. Long-term sustainability is the key for Dubai and the government is addressing this issue successfully."
Amjad said the Dubai market is continuing to absorb new launches, despite projects being delivered. This was displayed with the recent delivery of the International City and Jumeirah Beach Residence projects, he said.
"People were predicting that the release of JBR and the International City would lead to a decrease in demand, but the more than 25,000 units in JBR have been absorbed into the market without causing even a small drop in demand."
Amjad said Dubai is aggressively targeting population growth, which will also lead to growth in demand for real estate.
"The government is building a city for five million people whereas today we have fewer than two. This means that whatever is supplied now will not be enough," he noted.
"Markets are at a maturing stage. Rents are up and there are many people who are currently renting but who intend to purchase homes. This includes people who are on lower to middle incomes who are lower risk takers, and have been waiting to purchase properties.
"Finance and mortgages are increasingly available to these people, so more demand is being created there. There is a shortage in terms of products in this area of the market which we are addressing."
As a result of this new trend, the developer is looking for opportunities in the residential sector, and Omniyat will unveil a new 1.5 million sq ft residential waterfront development at the Cityscape exhibition in October, he said.
While few details are being released, Amjad described the project as a unique and surprising product, offering a combination of residential and retail space.
Amjad believes both institutional and private investors are also driving property demand in Dubai.
"Dubai is now seen as an international hub and foreign investors are being attracted to investing here. The new trust law is also helping these investors to have trust in the transparency of regulations here. Although we are yet to see the law in operation, I think its existence adds a professional structure to Dubai's real estate markets."
The majority of foreign investment is coming from the UK and Europe, but institutional money from the US and Asia is also increasing, he notes.
Amjad has his own development plans for international expansion, beginning with Saudi Arabia, and Abu Dhabi. He intends Omniyat to become an international company by 2008.
Saturday, 19 January 2008
Dubai Property Prices Are Falling
A warning on Dubai property prices has been issued by Standard Chartered Bank, which is predicting both residential sale prices and rents will fall back by 5 per cent next year. It reasons that with a stream of developments coming to completion, that even though demand currently outstrips demand, this situation will soon be reversed.
The bank suggests prices, which by its reckoning are still rising at 18.8 per cent per annum, will peak in the first half of next year. However, while Dubai will feel the heat, Abu Dhabi may move ahead on the back of recently liberalised investment rules.
A Prime Group report cited by Standard Chartered estimates that around 52,000 new Dubai residential units will be completed next year, with a further 63,000 set for release in 2008. Given ‘a reasonable assumption’ of 7 per cent population growth for the emirate, this suggests supply will exceed demand by around 6,000 units in 2007 and 33,000 units in 2008. The result is likely to be that property prices and rents will slip for the next two years.
‘We have argued before that residential property prices are likely to come down around 20 to 30 per cent in the next two to three years and we believe that we are getting close to the peak in residential property prices’, said Steve Brice, regional head of research for the bank for the Middle East.
‘While demand is likely to remain strong in the coming years, as Dubai continues to focus on diversifying its economy away from oil, the key is supply’.
The Bank said prices jumped by an ‘extraordinary’ 12.9 per cent in October after a 1 per cent fall between July and September. This ‘may have come from a realisation that estimates for the release of properties reported for the second half of the year are unlikely to be attained. Indeed, one developer at one point suggested it would be releasing 60,000 units onto the market in the second half of 2006 and Prime Group now estimates the full year market figure will only be 40,000. There may also be a seasonal effect at play here’.
The bank suggests prices, which by its reckoning are still rising at 18.8 per cent per annum, will peak in the first half of next year. However, while Dubai will feel the heat, Abu Dhabi may move ahead on the back of recently liberalised investment rules.
A Prime Group report cited by Standard Chartered estimates that around 52,000 new Dubai residential units will be completed next year, with a further 63,000 set for release in 2008. Given ‘a reasonable assumption’ of 7 per cent population growth for the emirate, this suggests supply will exceed demand by around 6,000 units in 2007 and 33,000 units in 2008. The result is likely to be that property prices and rents will slip for the next two years.
‘We have argued before that residential property prices are likely to come down around 20 to 30 per cent in the next two to three years and we believe that we are getting close to the peak in residential property prices’, said Steve Brice, regional head of research for the bank for the Middle East.
‘While demand is likely to remain strong in the coming years, as Dubai continues to focus on diversifying its economy away from oil, the key is supply’.
The Bank said prices jumped by an ‘extraordinary’ 12.9 per cent in October after a 1 per cent fall between July and September. This ‘may have come from a realisation that estimates for the release of properties reported for the second half of the year are unlikely to be attained. Indeed, one developer at one point suggested it would be releasing 60,000 units onto the market in the second half of 2006 and Prime Group now estimates the full year market figure will only be 40,000. There may also be a seasonal effect at play here’.
Liquidity and supply issues drive Dubai prices higher
Waiting for a housing crash to buy a property is like hoping to win a raffle. The chances are it may never happen. And when it does you may not have the ticket to claim your raffle prize or the cash to put down on a deposit.
A word of caution to the many pundits who predict a housing crash in Dubai: one thing well known in the prediction business is that when so many people are predicting an event, it seldom happens, or it does so very much later than predicted.
Consider the UK housing market. How many people said the market was becoming overheated in 1999? And yet there was no sign of a downturn until the summer of 2004, and even now prices have barely moved from their peak levels, despite a series of interest rate rises.
The Dubai Marina factor
The same school of analysts now takes a long-look at the Dubai Marina apartment towers shooting up, and concludes that the end of the Dubai property boom is nigh, and that oversupply is clearly close. But this is not what we see in the marketplace.
It is presently very difficult to find a property to buy in Dubai, and even if you move fast the home that you like is likely to be snapped up from beneath your feet by somebody offering more money. This is an ongoing boom, though admittedly mainly for completed property.
The rental market in Dubai has soared so high this year, up 40% on some reckonings, that the Crown Prince General Sheikh Mohammed bin Rashid Al Maktoum has ordered a 15% rental rise cap until the end of 2006. This is hardly the stuff of a property market about to collapse.
Even the upcoming supply is contributing to the boom in prices and rentals by running later and later. For each month's more construction delay means higher rentals and prices in the completed housing market.
What is the base price?
With the huge liquidity in the region is it not more likely that house prices will go higher in the immediate future, before reaching a peak? It could well be that today's prices are therefore the new base price to which prices will fall in a 'housing crash', or the base price level may actually be higher than we see right now.
Meanwhile, those potential buyers who choose to carry on renting have to pay the very high current rental prices; and while the 15% rent cap protects existing tenants, it probably will not help new tenants avoiding a rent rise. Besides which, do not higher rental prices in themselves have an impact on property values?
Surely higher rents make properties worth more, not less? Around the world rental yields are often presently around 50% lower than in Dubai, and why should property investors expect to earn more in a booming city like Dubai? Yet rents have risen by more than house prices this year, can this go on much longer?
No, the immediate pressure on Dubai house prices is all upwards. No doubt supply issues will kick in later on, but this may not be for two or even three more years, assuming that oil prices do eventually come down. But will this happen? Oil supply issues suggest a different market dynamic may be in place.
If oil is now permanently higher in price then Dubai property will settle at a permanently higher level of value as Dubai will become one of the richest cities in the world, and in rich cities property is not as cheap as it currently is in Dubai.
A word of caution to the many pundits who predict a housing crash in Dubai: one thing well known in the prediction business is that when so many people are predicting an event, it seldom happens, or it does so very much later than predicted.
Consider the UK housing market. How many people said the market was becoming overheated in 1999? And yet there was no sign of a downturn until the summer of 2004, and even now prices have barely moved from their peak levels, despite a series of interest rate rises.
The Dubai Marina factor
The same school of analysts now takes a long-look at the Dubai Marina apartment towers shooting up, and concludes that the end of the Dubai property boom is nigh, and that oversupply is clearly close. But this is not what we see in the marketplace.
It is presently very difficult to find a property to buy in Dubai, and even if you move fast the home that you like is likely to be snapped up from beneath your feet by somebody offering more money. This is an ongoing boom, though admittedly mainly for completed property.
The rental market in Dubai has soared so high this year, up 40% on some reckonings, that the Crown Prince General Sheikh Mohammed bin Rashid Al Maktoum has ordered a 15% rental rise cap until the end of 2006. This is hardly the stuff of a property market about to collapse.
Even the upcoming supply is contributing to the boom in prices and rentals by running later and later. For each month's more construction delay means higher rentals and prices in the completed housing market.
What is the base price?
With the huge liquidity in the region is it not more likely that house prices will go higher in the immediate future, before reaching a peak? It could well be that today's prices are therefore the new base price to which prices will fall in a 'housing crash', or the base price level may actually be higher than we see right now.
Meanwhile, those potential buyers who choose to carry on renting have to pay the very high current rental prices; and while the 15% rent cap protects existing tenants, it probably will not help new tenants avoiding a rent rise. Besides which, do not higher rental prices in themselves have an impact on property values?
Surely higher rents make properties worth more, not less? Around the world rental yields are often presently around 50% lower than in Dubai, and why should property investors expect to earn more in a booming city like Dubai? Yet rents have risen by more than house prices this year, can this go on much longer?
No, the immediate pressure on Dubai house prices is all upwards. No doubt supply issues will kick in later on, but this may not be for two or even three more years, assuming that oil prices do eventually come down. But will this happen? Oil supply issues suggest a different market dynamic may be in place.
If oil is now permanently higher in price then Dubai property will settle at a permanently higher level of value as Dubai will become one of the richest cities in the world, and in rich cities property is not as cheap as it currently is in Dubai.
Saturday, 8 December 2007
Trump, Armani Refuel the `Dubai Bubble' Debate: William Pesek
Even amid a skyline jammed with massive construction projects, the Burj Dubai is a standout.
In September, it beat the 31-year-old record held by the CN Tower in Toronto to become the world's tallest free-standing structure. When it's completed in 2008, Dubai's tower will be the tallest building in every category and home to one of Giorgio Armani's first hotels.
This is kind of a Dubai obsession -- having the biggest this, grandest that, most ostentatious the other thing. Developers have designs on the biggest shopping mall, the largest theme park, the first submerged luxury hotel and an artificial archipelago that is expected to be visible from outer space.
Dubai seems a unique amalgam of Hong Kong, Riyadh and Las Vegas. No doubt this latter quality -- giant themed hotels and countless construction sites cropping out of the desert -- explains Donald Trump's interest. The Trump Organization's 48- story tower will include about 660 hotel rooms and condominium apartments.
It's no wonder economists are buzzing about the ``Dubai Bubble,'' especially with crude-oil prices near $100 a barrel.
Actually, they have been talking about Dubai's property markets imploding for years -- to no avail. As oil prices rise and Dubai, one of seven sheikdoms of the United Arab Emirates, diversifies its economy, it continues to confound the skeptics.
Bright Future
``Just look around this place,'' Faisel Hoodbhoy, a managing director at Dubai International Financial Exchange, said at an Institutional Investor conference last week. ``The future for Dubai is very, very bright.''
Of course, doomsayers may have some ammunition in the ``skyscraper curse.''
There's an old saying in journalism that if you have a good story, write it from time to time. We all have a couple of favorite issues, causes or quirky lenses through which to view complex problems. One of mine is the uncanny correlation between tallest-building projects and financial crises.
It happened in Kuala Lumpur in 1997, Chicago in 1974, New York in 1930 and in biblical times with the Tower of Babel. A bizarre coincidence perhaps, yet humankind's propensity for architectural overreach has been a reliable omen of meltdowns.
Taiwan, which in 2004 became home to the tallest building, was arguably affected. Its economy didn't implode, so much as it's disappearing. China has done a masterful job marginalizing an island it sees as a breakaway province. Now, among Taiwan's main allies are Kiribati, Swaziland and the Holy See. An economic crisis? You decide.
Development Miracle
The thing about record-breaking skyscrapers is that they can say as much about hubris as wealth, ambition and technology. Is Dubai a development miracle? Or is it the center of an Arabian asset bubble tied to surging oil prices?
At least for the moment, it would appear to be the former.
The rise in oil prices may prove more secular than cyclical. Demand from China and India alone almost ensures it. Officials point out that oil revenue accounts for just 6 percent of Dubai's gross domestic product. Even so, it's not clear its banking and tourism industries would offset an oil crash. Luckily for Dubai, oil prices are likely to stay high.
Also, much of the oil proceeds are being invested at home. Dubai's boom isn't being financed with debt the way previous ones were in Asia and the West; it's being financed with something closer to equity, if you will -- shares in Dubai Inc.
Dubai Inc.
Speaking of equities, DP World Ltd., the Dubai-owned port operator with terminals from the U.K. to China, last week raised $4.96 billion in the Middle East's largest initial public offering. It was Dubai's biggest step to date in establishing itself as a global financial center.
Dubai is stepping up efforts to attract more IPOs. The small size of Dubai's stock market explains why so much money is flowing into property. Dubai is working to change things, including building a bigger bond market.
``It's going to be a bonanza for investment banks,'' said Henry Azzam, chief executive officer for the Middle East and North Africa at Deutsche Bank AG.
In a dangerous world filled with geopolitical risks, Dubai might be considered a ``Green Zone'' for Middle Eastern investment. Attracting cash from Muslim investors is only part of the push; another is attracting the biggest institutional investors from New York, London and Tokyo.
Boom and Bust
Yet oil booms have an erratic track record; just about every one has been followed by a painful bust.
The outlook for energy is cloudy as Venezuelan President Hugo Chavez and Iranian President Mahmoud Ahmadinejad try to use oil as a weapon against the U.S., and as concerns mount that the dollar will collapse or that the U.S. might attack Iran. Also, inflation in the U.A.E. rose a record 9.3 percent last year amid surging property prices.
To sustain the boom, Dubai needs to beat the system, so to speak; it has to overcome the skyscraper curse. Trouble is, few economies have done so.
In September, it beat the 31-year-old record held by the CN Tower in Toronto to become the world's tallest free-standing structure. When it's completed in 2008, Dubai's tower will be the tallest building in every category and home to one of Giorgio Armani's first hotels.
This is kind of a Dubai obsession -- having the biggest this, grandest that, most ostentatious the other thing. Developers have designs on the biggest shopping mall, the largest theme park, the first submerged luxury hotel and an artificial archipelago that is expected to be visible from outer space.
Dubai seems a unique amalgam of Hong Kong, Riyadh and Las Vegas. No doubt this latter quality -- giant themed hotels and countless construction sites cropping out of the desert -- explains Donald Trump's interest. The Trump Organization's 48- story tower will include about 660 hotel rooms and condominium apartments.
It's no wonder economists are buzzing about the ``Dubai Bubble,'' especially with crude-oil prices near $100 a barrel.
Actually, they have been talking about Dubai's property markets imploding for years -- to no avail. As oil prices rise and Dubai, one of seven sheikdoms of the United Arab Emirates, diversifies its economy, it continues to confound the skeptics.
Bright Future
``Just look around this place,'' Faisel Hoodbhoy, a managing director at Dubai International Financial Exchange, said at an Institutional Investor conference last week. ``The future for Dubai is very, very bright.''
Of course, doomsayers may have some ammunition in the ``skyscraper curse.''
There's an old saying in journalism that if you have a good story, write it from time to time. We all have a couple of favorite issues, causes or quirky lenses through which to view complex problems. One of mine is the uncanny correlation between tallest-building projects and financial crises.
It happened in Kuala Lumpur in 1997, Chicago in 1974, New York in 1930 and in biblical times with the Tower of Babel. A bizarre coincidence perhaps, yet humankind's propensity for architectural overreach has been a reliable omen of meltdowns.
Taiwan, which in 2004 became home to the tallest building, was arguably affected. Its economy didn't implode, so much as it's disappearing. China has done a masterful job marginalizing an island it sees as a breakaway province. Now, among Taiwan's main allies are Kiribati, Swaziland and the Holy See. An economic crisis? You decide.
Development Miracle
The thing about record-breaking skyscrapers is that they can say as much about hubris as wealth, ambition and technology. Is Dubai a development miracle? Or is it the center of an Arabian asset bubble tied to surging oil prices?
At least for the moment, it would appear to be the former.
The rise in oil prices may prove more secular than cyclical. Demand from China and India alone almost ensures it. Officials point out that oil revenue accounts for just 6 percent of Dubai's gross domestic product. Even so, it's not clear its banking and tourism industries would offset an oil crash. Luckily for Dubai, oil prices are likely to stay high.
Also, much of the oil proceeds are being invested at home. Dubai's boom isn't being financed with debt the way previous ones were in Asia and the West; it's being financed with something closer to equity, if you will -- shares in Dubai Inc.
Dubai Inc.
Speaking of equities, DP World Ltd., the Dubai-owned port operator with terminals from the U.K. to China, last week raised $4.96 billion in the Middle East's largest initial public offering. It was Dubai's biggest step to date in establishing itself as a global financial center.
Dubai is stepping up efforts to attract more IPOs. The small size of Dubai's stock market explains why so much money is flowing into property. Dubai is working to change things, including building a bigger bond market.
``It's going to be a bonanza for investment banks,'' said Henry Azzam, chief executive officer for the Middle East and North Africa at Deutsche Bank AG.
In a dangerous world filled with geopolitical risks, Dubai might be considered a ``Green Zone'' for Middle Eastern investment. Attracting cash from Muslim investors is only part of the push; another is attracting the biggest institutional investors from New York, London and Tokyo.
Boom and Bust
Yet oil booms have an erratic track record; just about every one has been followed by a painful bust.
The outlook for energy is cloudy as Venezuelan President Hugo Chavez and Iranian President Mahmoud Ahmadinejad try to use oil as a weapon against the U.S., and as concerns mount that the dollar will collapse or that the U.S. might attack Iran. Also, inflation in the U.A.E. rose a record 9.3 percent last year amid surging property prices.
To sustain the boom, Dubai needs to beat the system, so to speak; it has to overcome the skyscraper curse. Trouble is, few economies have done so.
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