While shepherds build their lofts by night

In a surprise move Sheikh Mohammed announced a renaming of the tower. It will now be known as the Burj Khalifa, after the president of the United Arab Emirates and emir of Abu Dhabi, Sheikh Khalifa bin Zayed Al Nahayan. Whether this move is a truly charitable and gracious act in honour of a neighbouring ruler, or whether Abu Dhabi in fact demanded this ultimate price in return for last month’s timely bailout of $10billion I guess we will never know. But if it is the latter then Dubai would have been in no place to argue. But what a price to pay!

Up to now the true height of the tower was kept secret – not that anyone in the world is in any rush right now to out-build them – and not that any reasonably skilled surveyor with good trigonometry skills couldn’t calculate it without too much bother. Unofficially the figure of 818 metres was being mentioned across the web. Today however the actual height has been released at 828m (2,716ft) which makes it 320m higher than its nearest rival, the Taipei 101.

So for those who have missed the stats….where have you been!! But seriously though here they are:

This truly is a monument to the ingenuity and optimism of human beings, though undoubtedly it also epitomizes the folly of extreme human pride and ego. Personally I think its pretty cool and who knows, if I had that much money perhaps I’d have wanted to build one too. Congrats to you Sheikh Mohammed on the achievement. A pity you had to give away the name.

Of course we can’t condone the use of virtual slave labour to get the job done – but hey aren’t all truly great monuments built on the back of slaves?! The Pyramids, the Taj Mahal, and now the Burj Khalifa.

Does this new kid on the block (or should that be new Block on the Block) herald a turn around in the fortunes of Dubai? Well after the 50% price dive of 2009 the omens remain poor for the time being. Remember that 90% of the population are expats and half of the whole work force is real-estate and construction based (according to Mr Saud Masud, an analyst at UBS Dubai.)

As outflows of these expats continue, he estimates a drop of 10% in Dubai’s population over the 2 years from start 2009 to end 2010. This will decrease the demand for housing, while over the same period new handovers of approx 40,000 new units will accentuate the over supply problem. The excess supply of housing could hit 30% by the end of 2010.

This does not bode well in the near term for any recovery in property values, although long term Dubai will no doubt survive as an important business hub in the Middle East, albeit one that’s had its wings clipped and some lessons in humility doled out by the spadeful.

On another note we came across an interesting subject about the Islamic view about building extravagantly on this website: http://islamqa.com/en/ref/101903

The author says:

“The Muslim should not make this world his main concern, and poverty is not what the Prophet (peace and blessings of Allah be upon him) feared for his followers, rather he feared that the world would open up to them and they would compete in worldly gain, for that could lead to their doom and destruction.”

It was narrated that ‘Amr ibn ‘Awf (may Allah be pleased with him) said: The Prophet (peace and blessings of Allah be upon him) said: “By Allah, it is not poverty that I fear for you, rather what I fear for you is that worldly riches may be given to you as they were given to those who came before you, and you will compete for them with one another as they competed with one another, and you will be destroyed as they were destroyed.”
Narrated by al-Bukhaari (2988) and Muslim (2961).

He goes on to say:

“We know that there is no reward in building a house per se, otherwise the rich who build palaces for millions would occupy the highest degrees of Paradise! The dinar that a Muslim spends on building his house will not be reciprocated in the Hereafter. A man may be free of sin, and if he is rewarded it will be only for his intention in protecting his family and household from indignity, and sheltering them in a house that protects their dignity and honour. But there is no reward merely for building a house, and he may be exposed to sin and punishment if he is extravagant and his aim is to show off and boast.”

The author also quotes the following from the sayings of The Prophet (peace and blessings of Allah be upon him):

It is proven in Saheeh Muslim in the hadeeth of ‘Umar ibn al-Khattaab (may Allaah have mercy on him) that when Angel Jibreel (Gabriel) asked the Prophet (peace and blessings of Allah be upon him) about the signs of the Day of Judgment approaching he said : “When you see the barefoot, naked, destitute shepherds competing in the construction of lofty buildings.” Ibn Rajab said, commenting on this hadeeth: What is meant is that the lowest of the people will become their leaders, and their wealth will increase, until they compete in building tall buildings, and adorning them. Al-Nawawi mentioned the same meaning in Sharh Saheeh Muslim, where he discussed this hadeeth.

Piers was clearly impressed by Dubai

There was nothing particularly new that we haven’t all seen many times before, yet when you watch any footage of Dubai, you cannot help to be wowed by the sheer grand scale of the Dubai project. After all the negatives we are hearing lately, even on this website(!) it makes you remember that somehow Dubai is something special after all. There is something to it. However its not all bright lights and glitter, for the city is still very young and has a lot of growing up yet to do. The laws often change overnight and you get the nagging doubt that its perhaps too good to be true. Like a Hollywood set that looks great at the front, but is just cardboard cutout, behind which is just desert. Wait, it IS just desert behind Dubai!

Piers Morgan for his part, was trying to give a balanced account of life out there from an expat point of view. However he succeeded only in showing Dubai as a place of excess, where greed is good. The expats he spoke to were only the uber-successful entrepreneurs, who all knew how to ‘work hard’ and ‘play hard’. There was the secretary from the home counties who has become a wealthy estate agent in four years with her own polo team complete with horses and trainer, and another girl from equally humble beginnings in the UK who runs her own magazine out there and frequents the polo get-togethers on the weekends at Arabian Ranches. The expats we met on the programme seemed to spend every night partying down at Barista bar and the rest of their spare time at the shopping malls. What was shown was a glitzy lifestyle and a very alluring one – I bet there’s going to be plenty of secretaries tonight going to sleep dreaming of moving out to Dubai to make their fortunes and sport permanent tans. However we didn’t meet the more middle of the road Brits, the bog-standard employees working out there. It would have been good to hear some of their views and opinions of life in Dubai.

In an attempt to inject a little bit of reality (!) into the mix we did get to hear from a computer magazine journalist who’d had his office shut down about 10 years ago because he’d dared to publish an article about an emirati with high contacts about how his computers didn’t work. Thankfully we are told, nowadays such censorship is unlikely. Still, Piers tells us, there seems to be a pervasive fear amongst the expat community that if you put a foot wrong or say the wrong thing, you could get deported at the stroke of a pen with precious little notice and no recourse to appeal. On the other hand Piers found it impossible to find anyone who had actually been deported so he concluded it was probably more an urban myth. Errrm…hello…thats because they’ve been deported so you’re not going to find them in Dubai!

Anyway the upshot of the urban myth is that there is very little crime in Dubai. The camp fashion photographer who had been expelled from the USA due to jewel thefts and subsequently allowed entry into Dubai positively adored the place. He felt that the strict rules were a small price to pay for the security of knowing you could leave your doors unlocked or your car window down and no-one would dare to steal.

We are shown that there are several strands of society, which never really mix on a social level. Piers literally skims over the majority of expats from the Indian Subcontinent who do the manual labour including most of the manual construction jobs. We don’t get to hear from even one. Perhaps part of the contract for being allowed to film there? On the other end of the spectrum we see some of the wealthy sheikhs, the actual rulers of the land who are all fabulously wealthy and can spend millions on anything they desire. Yet for them its more about showing capability rather than spending money. We meet Dr Sulaiman Al Fahim, one of the men behind the recent takeover of Manchester City Football Club, aboard his private plane as he explains
“It’s not about the egos, it’s about showing capability. We want to show the royal family that we can do it, and what they’re looking for is to build something unique, something extraordinary.”

Dr Al Fahim does not let money distract him from his true source of happiness, which is spending most of his social time with family. Of course having the cash to buy your family anything they desire probably helps! Dr Al Fahim shows us his one of a kind lamborghini with number plate “93″, worth $2 million. Why “93″? because its the year his wife graduated. How cool is that!
Piers wonders whether he can join the family by getting to know any of the single ladies. However he doesn’t get round to posing the question out loud!

We also got to meet Patty Parfitt, ex-wife of Status Quo band member Rick Parfitt. She lives with her son in a quiet expat gated community some miles inland, at least half an hour’s drive from main downtown Dubai. Yet her villa cost her £32,000 to rent last year, all of which had to be paid up front. For the coming year the rent had almost doubled! Anyone coming to Dubai she told us, must seriously weigh up whether the lifestyle is actually all its made out to be. Certainly you would need to be on pretty good money to afford those kinds of rents. Reading between the lines we also get the feeling that she is rather lonely. It seems getting to know people is not easy, especially for an older person who doesn’t have a job of sorts. She tells us that most people tend to stick with their families. Piers twigs and describes how it is apparent that she has fallen “out of love” with the Dubai dream. Patty gives a resigned sigh and a sad smile.

Despite these contemplative time-outs though, by the end of the programme we are left in no doubt that Piers Morgan cannot help but be impressed by the magnitude, grandeur and sheer scale of ambition that surrounds Dubai and its ruling Sheikh, Sheikh Mohammed. The latest ultra massive project on the go is Dubai Land, which is a theme park bigger in area than Birmingham, and with full scale replicas of the Taj Mahal, Eiffel Tower, the Las Vegas Strip and the Pyramids. It is apparent that what is happening here is the modern day equivalent of the Great Wall of China being built, and it’s happening before us, in our lifetime.

“As for the credit crunch,” says Piers, “everyone I have met here says the same thing, Dubai won’t just survive, it will thrive and that’s because it’s bursting with ambition and drive all lead by one man’s extraordinary vision and utter determination to turn this place into the biggest and most successful city in the world.”

To conclude his programme, Piers Morgan sums it all up in the words of any british builder – “It’ll be alright when its finished!”

Our thoughts after watching the programme? On the balance of it, just because of the grand scale and world leading vision of the place, it is certainly a contender for investment . However it is cetainly not immune to the credit crunch by any stretch. What is needed is a natural cooling down over the next year or two. After that without doubt there is every likelihood that we will continue to see sparkling gains from Dubai property, although hopefully on a more sustainable and gradual pace. Looking out 10 to 15 years, anyone who is able to afford to invest in Dubai as part of a balanced portfolio, should see solid gains. As with any investment though, spread your risk, diversify and don’t gamble with money you cannot afford to lose.

Links:

Watch the programme online at ITV catch-up (expires 26/02/09)


Piers Morgan on Dubai : The programme website

We’ve been speaking to our friends who are long-term residents in Dubai again.

According to word at ground level the number of expat families that have quit Dubai due to job loss over the past year and a half is around 60,000 already, and the pace of departures has been steadily picking up speed over the last quarter.

The advertising and construction industries are amongst the hardest hit. Last month Nakheel cut 500 workers, and in November Damac dropped 200.

We hear, though not through official channels, that as of this week, upwards of 1000 families per day are going home after losing visas, mostly back to the Indian subcontinent.

The Dubai system is pretty efficient at both ends of the job tunnel. When you first get a job offer then work permits are usually arranged quickly by the employer with minimal fuss. Once you lose that job though, the process is just as efficient. You are given a one month grace period to find another job. After that your “bataqa” (work permit) is withdrawn and you’re on the next flight out. If you delay then you get charged a fine by the hour!

This policy is implemented strictly and robotically. We have a personal story which illustrates this quite well – some years back an uncle of ours who had spent 26 years working in Dubai (without acquiring citizenship rights even after 26 years and kids having been born and brought up there) had to leave with his family after his job as an accountant ended due to retirement. His outbound plane was delayed by 3 hours. The officials at the airport made him pay a fine!!

Business tip – check the Govt car auctions

'the Dubai Job' - starring Michael 'expat' Caine

In many cases these loans have been guaranteed by their sponsors, the companies employing them, and they are left to foot the bill. However with companies themselves going bankrupt an increasing amount of debt will be now written off or given to debt collectors to chase, even around the world if the absconder hails from a country with information-sharing links.

Although the number of absconders is already way higher than its ever been, at present its mostly single guys and bachelors who are bailing out. Once the school year ends in the UAE it is likely that there will be another large wave of people skipping, this time many will be families. Families mostly pay school fees up front for the year, so any hard up families contemplating leaving Dubai in this way may well wait until the summer before they uproot.

kitne ka kiya?

Often the mechanics of such ‘hits’ was an individual setting up a legitimate business in Dubai, usually a shop. The shop would trade for some time and gradually build a credit line and accumulate large stocks in the warehouse, perhaps in the millions. Then one fine night the proprietor would call in black market specialists who would happily buy the stock in cash for a bargain price, still leaving the proprietor with an enormous profit. He would then cut and run in the night, leaving an abandoned shop to be discovered the following day!

Health warning – Property losses causing Heart-break

More from our pal in downtown Dubai who is awaiting heart surgery.

His essential, though not emergency, operation has now been put back for the fifth consecutive time by surgeons who have had a sudden increase in their workload. He has been told by the apologetic doctors that there has been an unprecedented number of men who have suffered massive heart attacks requiring emergency bypass surgery after losing in some cases many millions of AED in the property market!

This is both sad and stupid at that same time. Did they really think the market would go up forever and that making money was so easy and risk free? Yes, we’ve heard the adage “You have to speculate to accumulate” but someone should have told them another one: “You don’t speculate with money you cannot afford to lose.”

These wise words are worth remembering for anyone contemplating getting into the market at this time.

That used to be the oasis where Dad proposed to Mom

Unfortunately Dubai is no laughing matter now, especially not for the property investors from all over the world who now stand to lose a great deal. A friend currently working in Dubai sent his woes in an email. This one line sums it up “sh*t has started to hit the fan over here in Dubai”.

Several major Dubai property developers have begun laying off staff, and others are reviewing their recruiting needs as the available global finance becomes thin. Although hard statistics are difficult to come by for the region, a case in point is Emaar who is considering job cuts in the wake of the tumbling market. To keep you in perspective Emaar is the Gulf region’s largest property developer by market value, 32% owned by the Dubai government and is the developer behind the world’s tallest tower, the Burj Dubai.

Emaar shares were down nearly 80% in 2008 to 3.19 AED a share. Realtors are identifying worrying trends of rapidly declining house prices, a stagnant resale market, the inability of off-plan property investors to keep up with their payment schedules, a marked decline in hotel occupancy rates and wage and hiring freezes in property companies. To make matters worse, they have highlighted the government’s indebtedness [Yes Dubai is not as rich as you thought - it's Abu Dhabi which still has oil]. Dubai has borrowed heavily in recent years to finance all of the physical infrastructure needed to support its construction trend. So much is the fear of a Dubai Doom that the UAE President, His Highness Shaikh Khalifa Bin Zayed Al Nahyan had to reassure the people of the UAE that their economy is supported by a healthy and robust national banking system [do you believe in a healthy bank these days?! Lol and chuckle]. A royal effort indeed to save the Dubai Dream.

Still phenomenal projects are being announced in the Dubai heartland similar to existing ones such as Burj Al Arab and the Indoor Skiing Resort in the Emirates Shopping Mall, but I don’t see anyone buying these new projects. Local Urdu and Hindi channels in the UK are saturated with Dubai Exhibitions and to be honest they sound somewhat desperate. I know someone who bought property two years back in Dubailand and though on paper the value has gone up he has no buyers interested in taking it off his hands. There is virtually no resale market at all for these new apartments. Once you buy one, you are stuck with it.

The new Atlantis - perhaps an apt name?

[this article originally published on our sister site www.ultranomics.com by jq]

Desperate Project Manager decides to cut out the recruitment agencies and advertise direct

How is this for a novel approach to finding a new job? Get your black marker pen out and advertise yourself on the back of your £40,000 (AED 200,000) Porsche!

The BBC today reports that this is exactly the approach that one UK national, who has just been made redundant from his construction manager’s job in Dubai, has decided to do.

The 28 year old, Andrew Blair, from Bristol in South West England, explained his surprise at the sudden turnaround in fortunes which many Dubai based companies, especially those in the construction industry, are facing.

“Initially we were in a bubble here in Dubai, thinking we were immune from the credit crunch and really being arrogant about it,” said Mr Blair who moved from the Clifton area of Bristol to Dubai two years ago.

Now he is resigned to the fact that “At end of day if I don’t have a job I can’t afford the car, simple as that,”

Mr Blair, no relation to the ex-prime minister Tony Blair, shrugged his shoulders and accepted that “It’s desperate times so sometimes it takes a new approach.”

Mr Blair went on to say that if the plan didn’t work a re-spray of the car would cost around £500.

Developer woes

Mr Blair is yet another casualty, albeit one who still owns a Porsche, of the Construction industry’s woes in Dubai. Despite being home to the most ambitious building projects on the planet, including the world’s tallest tower and the world’s biggest shopping mall, as well as the surreal offshore Palms and World islands, its real estate economy is now seriously starting to unravel.

Its over dependence on tourism and real estate, with no major oil reserves to back it up (unlike its oil-rich neighbour Abu Dhabi) has left it exposed to the global credit downturn.

Last week, property development giant Nakheel disclosed that it is delaying construction of its new record-breaking tower project that was designed to rise more than a kilometre high into the sky.

“Developers have got serious cash flow problems,” says Colin Foreman from Middle East Economic Digest.

“Their revenue was coming from selling properties which hadn’t been built yet and they were supplementing this with financing. ”

“Banks aren’t interested in lending them money and nobody is interested in buying property, so their two avenues for finance have gone.”

“At the same time they have got huge outgoings because they are building projects that they no longer have money to pay for.”

Is it all down from here for expats invested in Dubai?

The trouble is that expats, like Mr Blair, make up four-fifths of Dubai’s population. If they start going home, demand for property will slump even further.

A further concern is that with falling incomes and credit, and now sterling hitting a record low, the tourism market is also being hit. Western tourists are cutting back on spending, and occupancy rates at many of Dubai’s luxury hotels are down.

Loss of Confidence

It is quite amazing just how many companies around the world and countries in the region have bought into Dubai’s success, bearing in mind it has come all this way in just the last 20 years or so.

It truly is the financial, retail and tourism hub of the Gulf region. So how much will this developing shake (sheikh) down damage the Golden Emirate’s attractiveness and future prospects?

According to Khalfan Saeed Al Kaabi, who runs a handful of construction related companies based in Abu Dhabi it will cause a palpable loss of credibility. “Looking at the long term, Dubai has built itself on the promise of tomorrow and people have been buying into the dream it will deliver,” says Mr Al Kaabi.

“It now says it will not be able to deliver these dreams, so as an investor that credibility has gone.”

“Dubai needs to do a lot of work to restore that credibility over the next two years.”