The biggest speculation related to Dubai’s new property boom is on the speculation itself. There is a range of differing perceptions about the sustainability of the boom, although the majority view is that the new project launches are characterised by moderation rather than frenzy, the type of which drove the market to unsustainable dizzy heights in 2008.
Unlike in the past, much of the current pick-up in Dubai’s property sector is attributed to the flow of funds from areas of political turbulence such as Syria and Egypt, and mostly in the form of cash transactions. There is some concern that this is leaving out a huge potential segment of buyers who would want to own their homes using mortgages, which lends depth to any property market.
Recent reports by Standard Chartered Bank and Jones Lang LaSalle represent two contrasting views, with the former forecasting a moderate pick-up and the latter questioning the sustainability of the current rates. Interestingly, there is a clear change in the perception of the western media about the new boom taking hold in Dubai’s property market.
The global media has obviously been cautious in its assessment, but recognises that the new development wave is for real. Even when it talks about the possibility of bubbles developing over the medium term, there is a clear moderation in the approach.
Moderation in Western views
In the wake of the 2008 crash, Dubai had been subjected to virulent criticism, bordering on hostility, in the international press for what was termed as excesses by developers and the authorities. There were few takers for the confidence exuded by the managers of Dubai’s finances that the emirate would come back and be on its own in due course.
That promise has been fulfilled to a large extent, thanks to a number of factors, some of which are the result of calculated risks while some others just happened because of good fortune. The net result has been a positive turn of events, which the western media has come to acknowledge by and large.
There may be other reasons as well for the moderation in western views. When the Dubai crash happened, Detroit was still managing its affairs pretty well and the last US government shutdown was almost 20 years behind. But today, both conditions have changed.
Detroit itself has filed for bankruptcy and the city has had to be provided emergency funds by the federal government to keep municipal services running. The city is now said to be weighing options of selling its prized arts museum and other possessions to raise cash to pay back debt. Detroit’s international profile as the city that sheltered the global automobile industry is by no means less illustrious than that of Dubai.
The embarrassment caused to the US ‘soft power’ image — which Americans tout as their nation’s ability to wield influence through its culture, values and governance rather than by force — by the 16-day shutdown would surely influence media approaches towards debt, default and financial emergencies.
President Obama could not have been more forthright when he acknowledged that the shutdown had hurt Washington’s global position and done more damage to America’s credibility in the world and its standing in the global arena. “It’s encouraged our enemies, it’s emboldened our competitors, and it’s depressed our friends who look to us for steady leadership.” These words of the President will echo in the corridors of global finance for a long time ahead.
The poser has a special meaning for governments and investors in the Middle East, who hold large amounts of assets in US securities. A possible US default, which cannot still be ruled out for good, could be more dangerous to the rest of the world than it is for the Americans themselves.
Perhaps the western media is coming round to the view that the time for a ‘de-Americanised’ view of the world has finally arrived.
The writer is a journalist based in Dubai
