Dubai in Decline?

by Matt Ball on December 15, 2008

Dubai World Islands

In an amazing change of fortune, it appears that the massive building boom in Dubai may be meeting a messy end. Similar to the “irrational exhuberance” that took place during the Dot-com era, real-estate speculation took hold and housing prices escalated rapidly along with the dramatic office towers and off-shore islands. But now with the credit crisis and the precipitous drop in oil prices, the bottom appears to be falling out.

A fascinating feature in this week’s Newsweek picks apart all of the reasons for this dramatic decline in fortunes.

The future of Dubai rests on the availability of cheap fossil fuels for energy generation, and the willingness of the world’s wealthy to travel by airplane to the this luxurious destination. New evidence suggests that Dubai could be irreparably harmed by climate change that could dry up the available water.

Will Dubai be remembered as one of the many excesses of early this century or can it save itself? There are growing movements for more green approaches in this city state, but the pendulum of globalization may have swung too far away toward recessionary frugality to return it to prominence as infrastructure spending turn toward internal and practical pursuits.

{ 9 comments… read them below or add one }

Kevin December 15, 2008 at 8:29 am

While Dubai is heavily influenced by oil and travel, and is not doubt going to feel the current finance crisis, I think it is becoming less dependent as you infer on cheap fossil fuels and wealthy travellers. Dubai recognized long ago that fossil fuel supplies were finite and has diversified its wealth including global property and corporate investments, as well as shaping itself to become a major global finance center attracting international companies (which of course are feeling the crisis in their market).

An Economist article similar to the Newsweek one:

uae professional December 27, 2008 at 3:59 am

I agree with Kevin that Dubai, indeed has diversified its economy and energy resources. However, I was pessimistic about Dubia’s continued prosperity way before the financial crisis hit. How can any city hope to survive let alone continue to grow without acknowledging their need for a proliteriate class? Even if they don’t have a Labour Day, as most civilized nations do, they should at the very least have low income housing. Yes, the majority of people in Dubai are in fact the invisible lowcome labourers and professionals (foriegners) who don’t appear on the flashy tourism brochures. Shame on all the leaders who allows this to continue!!!

Atif January 7, 2009 at 10:16 am

No doubt Dubai is city of glamour, full of joy and has beautiful nights. But only for those who have proper job, residency and money. I love Dubai.

Pete January 20, 2009 at 6:08 pm

Dubai’s economy is a pack of cards based solely on oil & now with oil being where it is and alternative energies coming to the fore, this pack of cards has crumbled in a New York minute. I very much doubt that it’ll ever recover!

Stevie Gilroy January 26, 2009 at 8:12 pm

What is Mr.Obama going to do? looks as if he wants to focus more in the oil in his own country – great. They are still owned by the same people involved in the oil rich countries in the Middle East I believe. The price may come down a few cents for the Americans at least. When they discovered oil off Scotland’s shore the news was full of hope and promise to be the end of fuel prices, it never happened. Make it ‘look’ as if someone is doing something is always enough for the masses. Dubai has an awful lot of it’s wealth in the American banking system and they will never lose it…..!

as for Atif – you just gotta love him. Proper job, residency AND money, he loves Dubai so f%#& the rest of us….!

Mainasara May 18, 2009 at 8:47 am

Jas 5:1 Pay attention to this if you’re rich. Cry and moan about the misery that is coming to you.
Jas 5:2 Your riches have decayed, and your clothes have been eaten by moths.
Jas 5:3 Your gold and silver are corroded, and their corrosion will be used as evidence against you. Like fire, it will destroy your body. You have stored up riches in these last days.
Jas 5:4 The wages you refused to pay the people who harvested your fields shout to God against you. The Lord of Armies has heard the cries of those who gather the crops.

Dubai September 18, 2009 at 4:18 am

Great Dubai advice.

Sheikh Mo November 26, 2009 at 5:59 pm

We plan to save Dubai by printing a new currency in denominations of one hundred trillion. We will then build an enormous tower that reaches to the sun, and in it we will put all of the delights of the world.

Does anyone want to buy some half-finished apartment buildings with cracks in them?

Can anyone lend me a fiver?

Michael L. Weiss December 2, 2009 at 1:40 pm

Dubai is an amazing city with a lot of joy. howeverDubai is heavily influenced by oil and travel, and is not doubt they meet this current finance crisis.

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