Amidst fears of a global slump, and the assumption that the Middle East will not be immune to it, the property developers of Dubai, located in the United Arab Emirates, continue to build, build, and build some more. As businessmen in the world’s hottest real estate market, who can blame them? Dubai’s annual growth rate has been a steady-near 18% since 2001, and it doesn’t seem to be slowing down anytime soon.
According to an article by The Guardian, many Dubai developers have no fear of a housing collapse. Sharif Shafei, a PR representative for a leading Dubai-based developer, is very confident in the stability of Dubai’s market: “I am telling people to continue to invest in real estate,” he insists. “There is no bubble that is going to burst.” Shafei is an Egyptian-Canadian whose company is behind huge construction projects in Saudi Arabia, Qatar, and Morocco, all of which are cashing in on an oil-driven boom as well as Dubai’s reputation for innovative architecture, lofty aspirations, and high returns.
However, the question stands: will the boom last, and for how long? Since January 2008, property prices in Dubai have increased by 40%, and in the last 18 months by nearly 80%. Despite multibillion propositions by companies such as Nakheel, Dubai’s government-owned real estate corporation and Meraas Development, investors are still worried, as collapsing banks could affect these companies and, in turn, their investments.
Additionally, there have been more warning signs about Dubai’s property market. There is concern about corruption allegations against property and banking executives, as well as worries about speculative money propping up the market, primarily funded by the government.
Finally, one important aspect of Dubai’s boom is its large dependence on immigrant labor, many of whom are illegal. An article in the Sunday Herald highlights the poor working conditions of many immigrants, primarily from south Asia, who come to Dubai in hopes of enjoying its Mediterranean climate and glossy veneer, but end up living in poorly-maintained labor camps working on the construction crews to produce more futuristic towers.
The use of cheap labor presents more risks, because if these workers unionize, and are awarded better conditions and wages, the profit of Dubai’s construction firms could go down. This could lower confidence from investors. Needless to say, Dubai’s tall buildings, artificial islands, and utopian climate all appear to be the perfect components for the real estate market, and so far, it has been. However, the possibility remains that in the near future, the increasing prices of Dubai’s real estate, money speculation, and large workforce of immigrant labor could collapse, leaving Dubai in the dust along with the rest of the world.