In 1856, Walt Whitman observed that except for the poorest, New Yorkers were addicted to “occupying houses outrageously and absurdly too expensive”. Back then, the Top 1 per cent of the city controlled nearly 40 per cent of its wealth.
The phenomenology of buying luxury homes was apparent even then, and has since multiplied exponentially. When we look beneath the surface, the drivers of wealth in upper echelon real estate are coming from elsewhere. Looking back at New York’s data, in 1811, when Manhattan’s rectangular street grid was being imposed, housing was far more equally spread. And despite the influx of immigrants, remained so until the great fire of 1835 ravaged the city. It was the buying of of land, commercial areas and residential dwellings that was driving wealth higher and most of these were in lower- to mid-income areas.
As capital values rose, the wealthy looked to diversify their assets (jewellery, gold, equities and art were the common alternatives), and those price rises in turn fed the demand back to larger and more luxurious dwellings. As price rises became more pronounced at the upper end following the fire, wealth started to concentrate with the consequence that nearly 200 years later, Manhattan has been unable to develop middle-class housing ever since. This developmental mode ignored the root causes of wealth that ignited both the influx of people and capital in the first place.
Dubai’s takes a different path
Other cities such as Los Angeles, Berlin and Paris have been relatively more successful than Manhattan, but the conclusion has nonetheless been clear. Each city has lain greater emphasis on luxury dwellings as it has become more popular, with suburban sprawl and the satellite city phenomena being the natural consequence of urban development.
Is that then the natural progression for Dubai? If we go by recent events, it would certainly seem so. The pandemic has led to smart money snapping up increasingly luxurious dwellings with investors throughout the globe swooping in and generating eye-popping headlines of mouth-watering property sale prices. While these comparisons seem valid superficially, Dubai’s new 2040 Urban Plan suggests a radically different path, one that emphasizes the base of wealth creation at the core of its city development.
The envisaged doubling of population implicitly acknowledges the undersupply of housing at the mid-end, contrary to the narrative that has been spun thus far. Through a combination of increasingly varied and vibrant communities such as JVC (which has already emerged as the most popular spot for rentals in 2021) and innovative ownership measures such as fractional ownership, the model drives home the message that creativity, arts and commerce are symbiotic for Dubai’s development model. And that none of these variables can truly flourish without a base foundation of wealth creation drivers that fundamentally emanate from the mid-income housing market.
Green spaces and lots of it
The increased offerings in the capital markets signal the way for wealth generation to be diversified into genuine channels that underpin the economy’s foundation (rather than the distractions of new alternatives like crypto), which will lead to demand for real estate up the value chain. The focus on increased community space as well as town centres in the post-Covid setup (the world’s equivalent of the great fire of 1835) harnesses new found meaning for immigrants looking to relocate to safer pastures. This vision - breathtaking in scope - underlines a deviation from the development of other world centres. Dubai’s plans acknowledge the shortage of mid-income housing and inculcate the incentives in place that makes its development an eventuality.
There is one similarity between the city planners of New York in the 1850s and the Dubai of today. City officials in New York implemented one of the largest public works project in America - the sculpting of Central Park - in recognition of offering refuge to the masses in a city that had already been runover by wealth. By the end of the Civil War, the park was already attracting 7 million visitors a year.
Dubai’s urban plan takes the concept of community and land mark parks even further. Baked into its ethos is the heart of the common man and the aspirations to be part of the city’s growth and wealth creation. Today, Manhattan is unrecognizable without Central Park. Dubai, for all its gilded glory such as the Palm and Burj Khalifa, is similarly unrecognizable without its mid-income spaces - JVC, Emirates Living, Dubai Silicon Oasis and Sports City - and a clarion call that has been seared into its very fabric.
