On middle ground

On middle ground

There seems to be one destination where the credit crunch has not yet bitten. Rupert Bates visits the Middle East, and discovers that development in Dubai is still racing ahead.
Somebody wrote four years ago that when the definitive history of Dubai comes to be written, the Emirate will either be hailed as a stunning feat of engineering, or displayed as a warning of the perils of rampant property speculation.

Actually that somebody was me. I still do not have the answer. Visit Cityscape in Dubai - the biggest business-to-business real estate exhibition in the world - and you are still none the wiser, if a lot the giddier.

Many of the projects showcased at Cityscape, which attracted 60,000 visitors, are staggering in terms of both scale and concept. The master developers are either laughing in the face of the global financial meltdown, or choosing to ignore it.

It is a dilemma facing many UK construction workers, across the disciplines, casualties of the thousands of industry redundancies. The word on the Arabian Gulf is board an Emirates flight to Dubai, or an Etihad plane to Abu Dhabi and take a punt, or a dirham - the UAE currency pegged to the US dollar. Take a pinch of salt and a dose of cynicism with you as well.

All logic dictates that the United Arab Emirates, with its international investment model, has to feel the pinch. It prides itself on being the new global hub, the land of plenty linking east and west and therefore it cannot be immune to world markets.
Suggest this in the halls of Cityscape, a tide of Western business suits and Middle-Eastern dishdashas, and you are met with incredulity. ‘We are different’ is the message. They are different and largely because the Emirates are not countries; they are businesses and when your rulers are chief executives, things tend to get done. The government owns several of the master developers, so getting planning permission for the biggest building in the world is considerably easier than getting an extension past a West Sussex planning sub-committee.

Red tape for the property elite with Sheikhs in high places does not exist. But with benign autocracy comes commercial savvy. HH Sheikh Mohammed bin Rashid Al Maktoum, the ruler of Dubai, may drive around in a white Mercedes jeep with the number plate Dubai 1 and indulge his passion for racehorses - last month he bought more than 100 yearlings at Europe’s leading bloodstock sale in Newmarket - but he is the sharpest of businessmen, for whom nothing is impossible in one of the world’s fastest growing economies, with his vision for Dubai’s future driven by property and tourism as the oil runs out.

“The drivers of modern development are people. Tapping people’s skills and exploiting the desert, the creek and the beaches to creates a unique growth model. Our goal is to be number one globally. Development is a non-stop process and the race to excellence does not have a finish line,” said His Highness.

“Our national economy, banking sector and financial markets are sound. The new projects we launch are becoming a magnet for the world’s best expertise. These projects require associated facilities such as health, education, housing and telecommunications and prompt more investments.” His son the crown prince Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum is equally driven.

But are even Dubai’s pockets deep enough? The Emirate has borrowed vast amounts from abroad to fund its construction boom and is thus exposed to the global credit crunch.

There is a big, if friendly, rivalry between Dubai and the capital of the UAE the considerably richer Abu Dhabi, which holds the world’s biggest sovereign wealth fund, not to mention ten per cent of the world’s proven oil, five per cent of its gas reserves, oh, and Manchester City. What Abu Dhabi does not have is housing stock to meet huge demand and if Dubai needs bailing out it knows which neighbour’s door to knock on.

The total stock of residential units across Dubai is expected to be around 260,000 by the end of this year, with the vast majority apartments, according to Jones Lang LaSalle. Growth has slowed from a jaw-dropping 42 per cent in the first quarter of 2008 to 16 per cent in the second quarter, says Colliers International. Projects near handover trigger a spike in prices as speculators flip for the final time and long-term investors and end-users buy into these projects. High rents coupled with the liquidity crisis will see expatriates moving to Dubai for tax-free work needing higher deposits to enter the market. Prices of building materials, says Colliers, will rise 20 per cent this year.

“Yes there is a little bit of caution in the current market, but that is no bad thing and some of the speculators will leave the market. But long-term, bricks and mortars will always provide a good return,” said Peter Riddoch, chief executive of Dubai’s biggest private developer DAMAC. It may be running out in the region, but Dubai is still part of the petro-dollar economy and the first price Scotsman Riddoch looks at in the morning is dollars per barrel.

“We are looking to recruit staff across the board from project managers and quantity surveyors, to sales and marketing and customer relations,” said Riddoch, who started his property career as a trainee with George Wimpey.

The new kid on the Gulf is Ajman, the smallest Emirate under an hour north of Dubai and now part of the commuter belt with, at the moment, much cheaper property prices. They are doing vaulting ambition too.

Escape Ajman, with Ajman royal family patronage through the Crown Prince HH Sheikh Ammar bin Humaid Al Nuaimi, and the brainchild of a company called Equine Managements Services (EMS) led by Anwer Sher, is a 200-acre development, including villas, apartments and top-class equestrian facilities.

The kitchens are being supplied by Nolte KŸchen, and Escape Ajman has used the Nolte partnership to promote the development worldwide, testimony to the importance of global branding.

“This partnership comes after clear visions were met from both companies on promoting quality products within quality developments,” said Nick Heron, export director of Nolte KŸchen, a What House? Awards sponsor this year.

“We see the whole of the Middle East as an opportunity to develop sales with a quality German kitchen. Nolte is enjoying consistent growth in this region. We have had similar successes in Kuwait, Bahrain and Saudi Arabia and our partners are receiving equal interest in Oman and Qatar,” said Heron.

Similarly Armour Home, a market-leading UK home electronics manufacturer, is making in-roads into the Middle-East market with its Systemline Modular built-in home entertainment systems, partnering with companies in Dubai, Saudi Arabia and Jordan “to deliver projects on a scale that we are yet to see in our industry,” said Middle East sales manager Richard Hayward.

Another UK business expanding rapidly in the Middle East is architectural presentations company Idrawfast.

“We can take on any size project the Middle East can conceive. As other areas of the Middle East compete with the expansion of Dubai and Abu Dhabi we are well positioned to cater for a new era of digital media and interactive models. Competition for the best development is fierce and how this is shown pushes the boundaries of anything we have seen in the UK,” said Guy Costley, director of Idrawfast.

Before its oil discovery in 1966, Dubai was little more than a collection of fishing villages. This part of the Islamic world is relatively tolerant of western mores, although do not have sex on the beach unless it’s a cocktail and wait for your host to suggest wine if you have a lunch meeting. Patience is a virtue as personal relationships are hugely important if business is to be done.

This is 24-hour binge building. Excessive? Maybe. But well worth the ride for a while, while the UK construction sector tries to stagger to its feet.

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This entry was posted on Friday, October 31st, 2008 at 1:39 pm and is filed under Property UK. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.