Posted by Jim on January 03, 2008 at 15:11:53:
I have been in Dubai for 8 years now and have seen things go from nothing to where we currently are.
this was a great place to be 4 years ago. My initial investments did very well. Where am I now? Sold my last property this week and am now fully in cash (funds moved out of Dubai) and watching. There is a time to strike and a time to sit on your hands. In my opinion now is a time to sit on your hands.
I am long term bullish on this market but not now. Plan to buy back in on a future 20-30% correction. No inside knowledge; just gut feeling ( which tends to be right) and fundamentals/technicals. This market is overheated… period.
Never trust a developer or an agent here when dealing with an “off plan” project. Huge increases in commodities has allowed the developers to sacrifice quality on fit/finish in units in order to protect their profits (note your contract; they are written very “loose” for a reason). If you want something of quality; either gamble and buy off plan (expect the worst) or buy something finished that you can see and touch!
But Hereâ??s the Big Problem I See in Dubai
Dubaiâ??s boom is being driven by oil money, and an international gang of the rich and famous who are seeking a Middle Eastern paradise on the Persian Gulf.
None of this is being done by or for the common Arab, or the scores of construction workers and service employees that mostly come from Asia (the Philippines, in particular) looking for work.
In short, thereâ??s a big divide between whatâ??s happening in Dubai and the needs and desires of the resident masses.
What Iâ??m seeing in Dubai differs dramatically from the events taking place in China, India or almost anywhere else in Asia. In those places, billions of people are just emerging from poverty. Here in Dubai, most people, including the working class, are already relatively well off.
Thatâ??s a huge distinction, and itâ??s recognized by almost everyone I spoke to here. I asked three separate taxi cab drivers, a half-dozen shopkeepers, and a few hotel employees what they thought of the situation in Dubai. They all said pretty much the same things to me:
“Thereâ??s way too much construction going on.”
“The big money here is in for a fall.”
“The elite here are out-of-touch with reality. So are the wealthy international business community, and the tourists.”
As I said, most of the money building up Dubai is directly or indirectly oil money. Itâ??s as if the ruling party in Dubai (the Maktoum royal family), and other wealthy groups within the UAE, have nothing better to do with their money but spend, spend, spend.
They say theyâ??re aiming to diversify their economy away from oil revenues and into other forms of trade and tourism, but I have to wonder about their decisions. To me, it looks like thereâ??s a lot of ego going into the projects here. I see wasteful spending, and big bets that a huge future is in the offing.
Mind you, Iâ??ve enjoyed my stay here in Dubai. The climate is spectacular, the city breathtakingly clean, the people wonderful.
But there seems to be a big gulf between the rich and the not-so-rich in Dubai, and that worries me. Theyâ??re not on the same page. Contrast that with many parts of Asia, where the masses want to get rich, and the leaders are providing the means to do so.
Of course, thereâ??s one thing that both the ultra-wealthy and the masses seem to agree on in Dubai â?¦
Gold: Loads of It Being Bought By Almost Everyone in Dubai
Dubaiâ??s Gold Souk, an open-air market that contains some 500 gold shops, is the largest retail gold market in the world. An estimated 500 metric tonnes of gold, or nearly 18 million ounces, are bought and sold each year.
I got to the market at three in the afternoon, about an hour before the Islamic afternoon prayer session was to end. It was really exciting to watch the shopkeepers pour out of the local mosques and hustle back to their gold shops for the afternoon and evening trading sessions.
As the shops opened, gold buyers started pouring in by the masses. An hour after opening, almost all the shops I visited were packed with buyers.
Gold in Dubai is either 20k or 22k, and can be found in ingots ranging from roughly 1/10th of an ounce all the way up to incredible hand-crafted pieces of Islamic jewelry weighing a pound and costing tens of thousands of dollars.
But hereâ??s the most important point: In the gold souks of Dubai, both the ultra-rich and regular citizens are buying gold. I watched wealthy businessmen, construction workers, and imams all snatching up the yellow metal.
When I spoke with two Muslim women covered head-to-toe in their blue burqas, one of them said, “Gold never goes out of style, whether itâ??s jewelry or bars. Itâ??s really money.”
I couldnâ??t have said it better, nor could I have met a more gracious lady. Itâ??s rare for a devout Muslim woman to even acknowledge a strange man trying to talk to her, but she even took that picture of me in front of the gold shop when I asked her to.
I will visit Dubai again, perhaps next year. But if thereâ??s one conclusion I arrived at during my visit here, itâ??s that I wouldnâ??t make any big bets on the area. Thereâ??s no doubt that itâ??s booming, but the funding is coming from the richest of the rich, and the projects are mainly for the rich. They are not backed by demand from billions of people.
I Wouldnâ??t Bet on Dubai, But I Would Bet On Gold!
Just look at the projects at