Population Pampering

Dubai Drama…
Picture this: A burgeoning tourist economy, fully dependent on the attraction of its beaches, shopping malls, sun and fun-loving reputation, ravaged by the credit-crisis. Negative news reports about the deterioration of the city’s beaches, tourism service and quality of even food ingredients at restaurants continually appearing across international papers. A distinct sense of Schadenfreude on the part of those living in cramped, overcast and cold cities around the world, or a bursting of an obvious bubble? Whatever your take on Dubai and the UAE in general, there is no doubting the incredible efforts made by a city that only twenty years ago was dominated by one naturally occurring commodity – sand.

Whilst those sands have now been turned into glistening beaches (sometimes they glisten for the wrong, chemical, reason) and even the unforgiving landscape and environment of the desert craftily transformed into a tourist attraction in its own dune-buggying right, there are some fundamental issues playing against the growing city. The property bubble has been exposed for all to see and the story of boom and bust now well known and recited. The abundant credit that fuelled much of the incredible growth (an estimated 5.5% average GDP growth rate over the last ten years) and the eye-dazzling projects that marketed Dubai’s map placing strategy, dried up as fast as a sunbather drying in the blistering heat by the pool. The only problem for Dubai was that it could not dip back into its credit-pool to cool down, as the water had all but been drained in a reversal of appetite by international providers. What happened? Well, the same when anyone spends too much time scorching in the sun – it got burnt.

Rumours normally do very little to help markets. Dubai’s markets have suffered disproportionately at the behest of other’s viewpoints. What sometimes frustrates, even more than trying to explain you want the dressing on the SIDE of your salad in a Dubai eatery, is the strange desire by some UAE figureheads to want to add to the oblique nature of policy-making decisions. Just witness the sudden removal of the well-liked (by international investors it appears at least) Director General of Dubai’s Department of Finance. Nasser Al Shaikh had just returned from a weekend discussing Dubai’s re-financing strategy with international peers at the World Economic Forum on the Middle East in Jordan, but did not manage to make it back to his office at the Finance Department after touching down in Dubai. No one knows for sure what happened, and whether he simply rubbed-someone-up-the-wrong-way during the discussions, but markets in the region are refreshingly ignoring the lack of facts for now and focusing on the higher commodity prices and general re-allocation of capital to emerging markets. Still, uncertainty like this is an unwelcome reminder that significant issues are still to be resolved.

Statistics, or just static instinct?
With all the well-recited and negative anecdotal evidence since the worst of the crisis hit in January, it would seem incredible to expect anything but a fall in the population numbers dwelling in Dubai (and the UAE for that matter). However, in a surprise release (this is a far kinder reactive description than others would recite) of an official figure by the UAE Ministry of Economy, it appears that for all the talk of individuals packing up and leaving the city, the number of cars found abandoned at the airport terminals, and the clearing of traffic clogging up the streets in an almost synchronised effort, the UAE’s population has grown by an impressive (and conveniently in-line-with-trend-over-the-last-ten-years) 6.3%, with an above trend increase of 7.8% in Dubai alone.

Now, whilst the initial (and preferred) reaction by many pundits, international observers and others that-take-joy-out-of-others’-misery would be to choke on their “all-natural” Pret-A-Manger sandwich sitting in the office corridors of empty Canary-Wharf and devastated downtown New-York, a little reflection in a moment of pause (a rare event when discussing emotive Dubai) may enable one to understand just how such a seemingly preposterous statistic could even be considered plausible by the UAE authorities. With all indicators to the contrary, the fact is was a UAE release, and not just Dubai’s, is also a double-edged sword. Depending on your view, it may be that Abu Dhabi’s ministry officials have been inflicted with a version of the swine-flu and gone hot-in-the-head, or that the figure is in fact genuine, well researched and documented. Going on instinct, it would seem that such a statistic would not be released in such sensitive times without some element of truth.

Regardless of the difficulty in obtaining hard-facts, what we do know still speaks for itself. Property purchases (as deemed by Emaar up until May 2008) have been heavily skewed by UAE, Indian, Iranian and Pakistani residents in Dubai (24%, 15%, 15% and 12% respectively). Many of these end up as landlords and may well have been hit-hard by the sudden crash in prices and the abundant escape of western ex-pats to their (cold) homelands, especially with the largest growing ex-pat population almost disappearing back into the pubs of Manchester in one fell swoop – (didn’t they only came and sit in pubs here anyway?). Even with that exodus, it is still a very small section of Dubai’s predominantly sub-continental population - Asian ex-pats make up 65% of the current population, “others” only 4%.

Growth through good men…
Anyone reading this from the west may have difficulty understanding the extremely strong family-bond that underlies middle and far eastern cultures, but an Indian bachelor living in a barely-affordable one bedroom apartment just a year ago, with his family back home, may well be a happier person now. Why? Well, the once too-expensive-to-even-dream-about two bedroom luxury apartment that had been marketed to the flush-with-ex-pat-package-cash has now become a truly attainable place of abode for our lonely bachelor. The first thing he does (disappointingly for some, he does not throw a huge house party and invite a whole bunch of beautiful people over) – he sends for his family. Good man. If we extrapolate from this that the majority of lonely bachelors in Dubai are in fact good men, then the figures for population growth may actually start to stack-up. The UAE has always insisted it will depend on immigration in numbers from the likes of India and Pakistan and this currently seems the most logical explanation to help us believe the official statistical release.

A quick drive around Dubai during the working week paints a very different picture to the one witnessed by visitors over the weekend. Malls are empty, streets are quiet. However, despite a number of articles and rumours to the contrary, villa developments and other new “affordable luxury” residences are still filling-up. There are undoubtedly far too many buildings to prevent a continued fall in property prices – but some would argue that this is only a natural consequence of the overly-inflated “easy-days”. Furthermore, lower housing prices play into the hands of the lower-income generating Dubai resident. There is no hard and fast solution for some of the woes Dubai is experiencing, and although many will not agree with the tone of the city nor enjoy what is has created to offer to its residents, it would take a brave investor to totally write-it-off without feeling they may be missing out on a rapid return to form once all the pieces of the population puzzle fall into place.

The sands are not about to become the only attraction in the UAE just yet.