The Rise of DubaiOctober 21st, 2014 by Jason Hartman | Comments Off on The Rise of Dubai
Dubai has been in the news a couple of times lately, for reasons of varying important. First, because it hosted a hang out between at least one of the Kardashian sisters and former nemesis Paris Hilton. But Dubai again made the news because of a massive stock crash (6.5%) on Sunday, October 12, 2014.
The drop represents the biggest in four months and brings the Dubai Financial Market General Index to the lowest its been since late July. In the United States, stocks fell about 2.5% across the board–the Nasdaq lost more than 4%. But Jason Hartman has long spoken about the perilous gambling that is investing in stocks.
Dubai is the biggest city and emirate in the United Arab Emirates and is the second largest emirate (after Abu Dhabi, the capital) in territorial size. Located on the Persian Gulf’s southeast coast, it is one of seven making up the country and one of only two with veto power in the legislature. Home to the 2020 World Expo, it is a city on the rise.
Whether or not your wealth was affected by a fluctuating Dubai market, you might be wondering how the city rose to its current status.
Only a few years ago
It seems like Dubai only recently entered our minds–a city that was rich and unique, interesting, new. A city with a skyline that set records and allowed skiing any time of year, thanks to the inclusion of an indoor ski facility. The city was home to a shocking number of foreign born individuals–96%, making it more diverse than any other city.
Dubai was a modern city at the forefront of innovation, thanks to advances in both technology and transportation.
Before the jet plane came to Dubai in a significant way, it was a city linked to other developing cities and served as a place for Saudis and Iranians to visit when they wanted to get away from the more restrictive natures of their own countries. Russians would make purchases in Dubai and sell items back in Russia. In fact, a lot of international business people began to visit. And they stayed.
The idea of tax free salaries was pretty enticing, and by 1995, 20,000 Brits lived in Dubai. Dubai is now the financial hub of the Gulf.
Not all hearts and roses
Much of the money associated with the 9/11 attacks on the US traveled through Dubai, so it’s reputation is not spotless. But the 9/11 attacks only fueled growth in the area, growth that stopped only because of the financial crisis. Still, when the Patriot Act made it less appealing to invest in the United States, money was pulled from one country and invested in Dubai.
In real estate news…
In 2002, Sheikh Mohammed issued a decree which allowed foreign investors to own property in Dubai. This was the first time land reform measures allowed the ownership of real estate in any Gulf state–and it paid off. An area with little to no previous real estate market suddenly saw a shift from renting to home ownership. Wealthy folks from surrounding companies invested in Dubai real estate because their own countries were unstable and they feared for their wealth.
Real estate investment experts tauted Dubai as one of the greatest cities in which to invest and real estate markets continued to boom. If you’ve seen photographs of Dubai, you know what we’re talking about–a city that looks new and shiny, modern and full. Local architecture blossomed and the city built buildings shaped like trees and sandworms. Population increased and real estate continued to grow.
Dubai is divided up into free zones. People would be governed by different legal coded dependant upon where they were within the city. In this way, traveling amongst the various neighborhoods in Dubai became similar to traveling between whole different countries.
In 2002, the Dubai International Financial Center free zone opened, which made a block of desert off a major road into a free zone. The complex contains a variety of global banks and is intended to be a large space (110 acres) in which civil and commercial laws don’t apply, though other laws are written and implemented where needed. It’s a financial district with Western business sensibilities.
The DIFC has it’s own court system, it’s own official currency, it’s own official language.
Dubai is known as the financial hotspot of the Middle East, but leadership also hoped to make it a king of industry in other areas. Internet City and Media City make up another of Dubai’s free zones, which also have a very American feel.
These two “cities” are exempt from internet censorship laws too.
They’re a big deal, just ask Microsoft, who leases rent free for 50 years because they agreed to locate there and hang a big sign on the building. And where Microsoft goes, so go others–Hewlett Packard, Canon, and Dell, for starters.
The area has struggled to attract more creative types though. Regulations regarding intellectual freedom have prevented the two cities from growing as much as Dubai would perhaps like.
Media City is home to BBC, CNN, Reuters, al-Jazeera, and al-Arabiya. The location is popular because of it’s relative quiet in an area frequently at war.
A household name
Big companies mean big publicity for Dubai, as do the crazy buildings and indoor ski slopes. A man made island doesn’t hurt either–Dubai has become something of a household name. And while restrictions may now prevent Dubai from experiencing the growth many would hope for, it is certainly on its way.
It’s a city on the rise, both for celebrities and investors–heck, even celebrity investors. Dubai is quite a destination for expatriates and tourists alike, and certainly shows no signs of stopping. Whether you’re looking for a piece of investment property, a week of skiing during the off-season, or a visit to discover some of the most interesting architecture around, Dubai is a city worth visiting.