# Is the UAE experiencing a bubble?



## nicouru (Feb 8, 2006)

I am wondering if the UAE is experiencing a property bubble as of late, with all this development and billions of dollars worth of property investments. It seems a bit much especially with the Burj Dubai mega complex, and for an economy as robust but still relatively small economy supported by oil it seems unsustainable this level of development and investment at least to me. How much of this is supported by the high price of oil, and how much of this investment is actually sound investments? 

Personally I think it would be in the UAE's best interests to create government owned corporations which would invest billions in other nations which have real potential for long term profit like in Pakistan which would also create jobs and thus helping the poor throughout the Islamic world. Having successful international trans national corporations would supplement any loss in oil revenue and would make the UAE a much more forceful player on the international markets, also it would actually give them a real reason to create things like the Burj Dubai. Personally I think the UAE is wasting its money...


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## dazz (Jul 13, 2004)

Oil moneys are something like 10% of Dubai's GDP 



nicouru said:


> Personally I think it would be in the UAE's best interests to create government owned corporations which would invest billions in other nations


:lol: :lol:

Emaar & others are already creating multibillion projects in other countries

Have a look at our "Dubai Project Development" forum http://www.skyscrapercity.com/forumdisplay.php?f=416 as you can see there are many many projects in Dubai which aim is to boost economy. Not just some beautiful buildings...


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## dubaiflo (Jan 3, 2005)

http://www.skyscrapercity.com/showthread.php?t=266601

this should be also interesting
dazz, oil contributes 14% to UAE's GDP and 7% to Dubai's.


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## DUBAI (Aug 24, 2004)

dubaiflo said:


> http://www.skyscrapercity.com/showthread.php?t=266601
> 
> this should be also interesting
> dazz, oil contributes 14% to UAE's GDP and 7% to Dubai's.



its impossible to tell, they dont produce official figures. oil revenue is a state secret.

i know someone very well who works with the dubai gov on this and she she hinted strongly that revenues are a lot higher than the governemnts admit too, especialy in dubai. 

they say its 7%...

but that would mean that the rest of dubais economy rose quicker than the oil price. drasticly quicker. in which case at the end of this year, asuming oil prises dont rise, and perhaps fall a bit, oil should be less than 3% of dubais gdp.

possible???


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## nicouru (Feb 8, 2006)

_Dazz_

_Emaar & others are already creating multibillion projects in other countries_

I don't see y ur laughing your link only proved my point further, nothing *productive* is being invested in apart from an industrial park, which seems rather improbable to set up in the UAE with such a small population, of whom most of the wokers are not even native Arabs also with an investor would probably not want to invest billions in a region where "Al Qaeda" or whatever u want to call them Salafists, Jihadi's etc, and Iran could create a war in the region. I don’t think "Duabiland" is a sensible investment, its just adding on to the bubble like Tokyo Disneyland, or "the world" which is another grand waste of money imo. All of these investments depend on low interest rates around the world which has pumped up property prices to unrealistic levels and there seems to be more construction then demand I would imagine unless there is statistics to show otherwise. Secondly according to the UN the UAE total foreign direct invest around the world in 2004 was $1.4 billion, Bahrain had $3.9 billion in 2004. Now in terms of just Foreign investment I don’t have the figures, but it is obvious to me that the UAE is not a powerful force as it can be. 

According to the CIA oil accounts for 30% of the countries total output:


Its wealth is based on oil and gas output (about 30% of GDP), and the fortunes of the economy fluctuate with the prices of those commodities.

Pasted from <http://www.cia.gov/cia/publications/factbook/geos/ae.html> 

Higher oil revenue, strong liquidity, and *cheap credit in 2005 led to a surge in asset prices (shares and real estate)* and consumer inflation. 

Pasted from <http://www.cia.gov/cia/publications/factbook/geos/ae.html> 

It seems like a bubble to me, with billions upon billions of dollars flowing in, it seems they are just spending it without rationale apart from a fleeing profit motive. To be fair to the UAE it seems to be the strongest economy in the region regardless of this bubble, and it does seem to spend its money better then all the other oil nations. All I am suggesting is that the money could be better spend developing a international powerhouse then really nice towers. Also the UAE should beware of tightening monetary policy in the west, as investors, and tourists will be less apt to invest and visit.


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## dazz (Jul 13, 2004)

we really need to educate this man... 

just open your eyes and read this thread, and not only the first post, the whole thread...
http://www.skyscrapercity.com/showthread.php?t=266601


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## nicouru (Feb 8, 2006)

Oh I already read that thread...nothing impressive, and most of the investments are in property overseas...firslty, it reinforces my point of non-productive assests, and thus my point still stands. The country isn't investing its money wisely i.e. into productive corporations, brand name, global TNC firms. Investing $70 million in Guinea isn't going to change the world now is it? Or investing in London's Trafalgar square, whose profitability depends on interest rates, property values (which are declining in Britain), etc. So I dont think I need education, I think you need to understand what I am saying before you think u can tell me to get an education. Although you are doing a better job then I could have ever done in giving the masses the sources to prove my point...1000 thank you's.

Good day


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## dubaiflo (Jan 3, 2005)

you have no idea what you are talking about... there are multi billion dollar projects outside the uae done by uae based companies, 3% of daimler chrysler anyone?


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## AltinD (Jul 15, 2004)

5% of FERRARI.

Fully Ownership of Madam Tousoud - The wax museum and co-owner and operator of LONDON EYE, as well as owener of Legoland

World's 6th biggest Port Operator but with eminent take-over of P&O will become World's 3rd.

There are billions of dollars (each) investements in technology and industrial companies in Europe and Asia.


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## DUBAI (Aug 24, 2004)

Not just madame tusaud, but the whole of the tussauds group, the biggest theme park opperator in europe. 

including Alton Towers, Thorpe park and Chessington world of Adventures!


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## T0M0 (Jan 8, 2006)

Originally Posted by nicouru

property values (which are declining in Britain) :jk:

wish they were m8


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## DUBAI (Aug 24, 2004)

yeah, my rent is increcing from 55 pounds per person per week to 62, despite moving into a 6 bedroom house! which is further away from uni!


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## luv2bebrown (Nov 4, 2004)

CIA world factbook = outdated
it contains so much factually incorrect information.
even wikipedia is a more reliable and useful source


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## Dubai_Boy (May 21, 2003)

Hopefully one day Dubai can be as great as Pakistan.


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## nicouru (Feb 8, 2006)

dubaiflo said:


> you have no idea what you are talking about... there are multi billion dollar projects outside the uae done by uae based companies, 3% of daimler chrysler anyone?


If I have no idea of what I am talking about then u must be illiterate. Because like I said before, yes I the UAE may have investments in FI but not FDI which is fundamentally different. Do you even know the difference btwn FDI and FI, btwn an investment and a TNC? Btwn productive and non productive invesments? Obviously not…insulting me shows me you don't know what you are talking about. Investing 3% in Daimler Chrysler which isn't doing so hot right now, and hasn't since the merger is not a great thing to flout about. Now I will support your position superficially:

_Another important foreign exchange earner, the Abu Dhabi Investment Authority--which controls the investments of Abu Dhabi, the wealthiest emirate--manages an estimated $360 billion in overseas investments._

Pasted from <http://en.wikipedia.org/wiki/Economy_of_the_United_Arab_Emirates> 

Which is impressive to be sure, but in contrast to its FDI which is less then $2 billion these investments depend largely on the whims of forces that the UAE can't control, like interest rates, slowdowns, etc. I think a good example for the UAE would be a nation like Singapore which like the UAE has a huge investment firm, and billions in FDI. What if the stock market crashes tomorrow, or property prices decrease as they eventually will? 

In Britain the property values are starting to go down or the growth of the prices is slowing down as interests go up and debt starts to hit British households…read it in the economist. 

Also all of you people are not making any sense when you keep on telling me more and more unproductive investments in Europe, and FI. That's not what I am talking about…plz if you don't understand what I am saying ask me for clarification and don’t get a big ego that would prevent to ask.


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## Dubai_Boy (May 21, 2003)

YUCK , this thread is so pakistanidefenceforum Material YUCK !


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## dazz (Jul 13, 2004)

nicouru said:


> What if the stock market crashes tomorrow, or property prices decrease as they eventually will?


I don't know, maybe even more demand? maybe then I could invest in Dubai


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## luv2bebrown (Nov 4, 2004)

nicouru said:


> Also all of you people are not making any sense when you keep on telling me more and more unproductive investments in Europe, and FI. That's not what I am talking about…plz if you don't understand what I am saying ask me for clarification and don’t get a big ego that would prevent to ask.


where and how do you think the UAE should invest its surplus cash? specifics are welcome.


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## nicouru (Feb 8, 2006)

luv2bebrown said:


> where and how do you think the UAE should invest its surplus cash? specifics are welcome.


I'm glad u asked me this question. As we all know the UAE has been experiencing a boom in the property, and equity markets as of late, premised on a high exchange rate, low interest rates, high international demand for property due to easy money policies of the major nations, i.e. the United States. As I see it the amount of property being built seems excessive to the amount of realistic demand there would be for the region, in China for instance many towers are virtually empty. There are many reasons y I object to massive property developments especially for a nation like the UAE. The money which is rolling in now is being invested properly in terms of investing in overseas firms and the like. But I think the long term future of the UAE can be better secured by developing corporations inside the UAE, there are precedents in Korea and Taiwan where government intervention created profitable and internationally competitive corporations (Samsung, Honda, etc.), and unlike Korea or Taiwan the UAE has more then enough money to create a indigenous firm which would attract the best talents from the Muslim world to make a force in the international economy and start to replace the traditional suppliers of goods to the Muslim world from the West to a homegrown solution. The corporation at first will probably not be profitable, but once it got its legs into profitability independent of the government partial or full liberalization of the firm would be in order to maintain its profitability. This corporation would be able to do what the oil sector does not do, employ many persons directly in industry. Oil is a capital intensive industry and thus requires little in the way of labour. Once the corporation is successful, it should begin to expand by setting up plants in neighboring nations and beyond. Thus beginning to have more influence in these markets, thus bringing in real money, stable cash flows to the emirate something that oil nor stocks/property can do. It would employ thousands in real jobs, and it would make her exports more secure. To be sure the UAE will always be a oil economy no matter what, its fortunes depend on that, but it can ward off any downward pressure from the price of oil with real valued added exports. It would break the dependence of the UAE specifically and the Islamic world from Western products. That money should also be spent on creating high quality schools across the Islamic world to bring up the standard of living for all Muslims, not some religious school but a real school which would have religion in the curriculum but the core being relevant classes which would begin to create a ready workforce for the future industry of the nation and the region. Also the creation of this firm would require (if it involved in some from of production) the importatation of raw materials from nations which need to have more exports (Tanzania, Kenya, Somalia, Yemen, etc). Also it would alleviate further the strains of already strained labour markets in Pakistan, India, Egypt, Syria, etc. What industry should the UAE be should invest in? I don't think any one would do the job alone, electronics, textiles, financial services, etc. 

Instead what we are seeing is the money imo mostly wasted for the profit of the few in the society, not doing any long term good for the people of the UAE and the Islamic world as a whole. The property bubble is meant to burst it did in Japan in 1991 and they haven't really recovered yet, overinvestment in property or anything is bad economic policy anywhere at anytime. 

If any of you still don't understand my reasoning, you can ask for further clarification.


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## The Cebuano Exultor (Aug 1, 2005)

*Very true...*

^^ I agree with everything you say! Here...here! That is exactly what I was thinking. Investing too much in property, and "luxury property" for that matter, is totally unsustainable. I mean, how many people in the world could afford to buy a flat in a condominium in Dubai or anywhere else in the U.A.E. They should indeed follow the economic model of the Asian nations + the consumption level of the Americans.


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