American Interest in the Dubai Marina

...amid acrimony over the Dubai Ports World deal.


Al Fattan Towers & Jumeirah Beach Residences in Dubai Marina. Photo by AltinD, from Skyscrapercity.com Forums

The question of American interest in the Dubai Marina seems relevant for a number of reasons. Firstly, the United States, as the world's wealthiest nation in gross terms and among the wealthiest per capita, is exactly the kind of market that the huge development schemes in Dubai depend upon for success. The emirate, with a population of just over a million and only a fraction of that wealthy enough to afford properties starting around US $200,000, needs to attract buyers from abroad to purchase the upto 100,000 units being built in the Dubai Marina and adjacent Jumeirah Lake Towers developments alone. Although there is enough wealth spread out across the globe, being able to successfully tap into the largest and wealthiest market would make the task all the easier.


Page hits and visitors by country to Dubai Marina Communities website. USA 3rd with 75 out of 600 hits or 12.76%. (Click on graphic to enlarge.)

So, it makes sense to try to guage the level of American interest in the local property market. One measure of that could be the level of visitor activity at this and other Dubai Marina related websites. In Internet parlance, page hits (clicks on web links) from the US consistently rank among the top three, together with hits from the UK and the UAE. Part of this can be explained by the fact that the sites in question are in English, and the United States probalby accounts for the largest number (gross) of Internet users for any single country. Removing these factors the US would probably rank no higher than 3 or 4, among non-Arabic speaking countries, with regard to level of interest in Dubai Marina--in terms of online acitivity. Considering the general prominence of the United States on any number of levels, such a ranking is not particularly high.


American Johnny Rockets hamburger joint at Marina Walk.

Other ways to guage the level of interest among Americans may be more anecdotal but nonetheless revealing. Before the current Dubai Ports World controversy, there was little mention of Dubai or the UAE in American media, even while much attention was being paid to the region at large. The average American, prior to the emergence of DP World on newspaper front pages, would probably have never even heard of Dubai, much less consider it a place to buy property. Again, this seems to contrast dramatically with the UK (as highlighted in an earlier post entitled The British Are Coming!) where Dubai is seen entering the ranks of Spain, Greece, Cyprus or Turkey as the optimal place to consider for a second home, retirement or investment opportunity.

As an American myself and resident observer of the local scene over the past 5 years, I would highlight three reasons for the low level of American interest in Dubai (and by extension the Dubai Marina):

• the great distance between the two geographically.
  
• the general perception that the region is dangerous and unstable (post 1970's oil shocks, Iraq wars 1 and 2, 9/11, etc.).
  
• the fact that America is large and diverse enough (climatically, geographically and culturally) that there is little need to venture abroad anywhere to buy property.

The first and third factors will more or less remain constant, although faster and more direct flights between the US and the UAE can lesson the geographical gap. The key variable is the second, which if reversed could result in a dramatic increase in American interest. The perception of danger and instability does not at all match the reality of the situation in Dubai, but the effect of that perception is to reduce the likelihood of Dubai coming to mind in America as a potential vacation or real estate destination.

Ask the man on the street in America to choose the statement below which best characterizes the UAE, and see what he chooses.

The UAE is...

a)  awash with an ideology of Islamofacism.
b)  an oasis of tranquility amidst a sea of turbulence.
c)  neither of the above.

The best answer? Well, neither of the above--c. But if one were to look at Dubai in terms of opposite extremes, b most closely characterizes the situation there today. While not quite tranquil, the UAE is, by comparison to countries in the larger region, politically docile with practically no religious or social unrest to speak of. There are issues of worker exploitation and problems that tend to plague other modern urban communties, like traffic congestion and high housing prices. But none of this would suggest that the UAE is in any sort of turmoil much less gripped by Islamofacism or any other volatile ideology or activism. In reality there is a large measure of polical apathy as the population are either content with things as they are or, being largely expatriate, not willing to risk losing the welcome mat that allows them to live and work here for indefinite periods of time.

Statement a, above, could hardly be further from the truth. Yet these were the exact words of an American pundit discussing the DP World controversy on a recent National Public Radio (U.S.) broadcast. The misfortune for Dubai regarding the DP World controversy is that such negative (and inaccurate) perceptions become reinforced. But there is an upside, one that brings to mind the common saying, "There's no such thing as negative publicity." In large part Dubai was simply an unknown quantity in distant America. DP World has changed this--faster than the Burj Dubai, the man-made Palm islands or any other of Dubai's imaginative new development projects ever could. Some will venture beyond the headlines to discover the jewel in the hat (of the Middle East) that Dubai more closely resembles. It is common to see in the local blogosphere the expat community rally around the cause of DP World--as at UAE Community Blog. It isn't simply a matter of cheering on the local team, but rather a reflection of the awareness gained from living in Dubai and experiencing it is a desireable place to live and invest one's assets in.


  Another take on Jumeirah Beach Residences.

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What Earthquakes and Downpours Have in Common

23 Feb 2006, Onset of heavy rians, 7:48 a.m., Jebel Ali, Dubai.

When It Rains It Leaks

The UAE was hit by heavy downpours at dawn 23 Feb 2006. Reports later in the day spoke of flooded conditions in parts of Dubai, most notably in the new developments. (Gulf News, Morning thunderstorms flood Dubai and Rain washes away the gloss from Dubai's prime properties.) Bloggers and forumers post pictures and commentary--Wow - did it rain and Yay, it is raining. Also, some wonderfully artistic shots at Two Hydrogen atoms plus a single Oxygen.

As reported in the second of the Gulf News articles linked to above,

Householders blamed poor construction and inadequate maintenance for the problems, which began soon after the skies opened in the morning. People living in new developments such as The Meadows, The Springs and Arabian Ranches in the southern end of Dubai were among the worst affected.

Homebuilder and major developer Emaar has responded (in typical spin-doctor fashion, itallics mine):

Emaar staff have been on site in its communities assisting customers following the unusually inclement weather which has revealed some leakages and, in isolated cases, some minor flooding due to drain blockages.

It would be useful if clear numbers were generated that could reveal the true extent of leaking and flooding, rather than anecdotal reports. This would be relevant for apartment dwellers in Dubai Marina as well, where the author of "Wow--did it rain" comments (anecdotally), "We heard some people in our apartment building on the phone trying to get help for their flooded apartments higher up."

And the connection with earthquakes...

It is dramatic events such as these--rare heavy downpours or even rarer earthquake tremors (latest occurance 27 Nov 2005)--that get people to take more notice of build quality. There have, indeed, been ongoing reports in the news about problems in build quality since the first large numbers of completed villa and apartment units began to come down the pike in 2004 and 2005. But until the November tremor there was little discussion about the ability of new structures to withstand earthquakes, just as very little attention has been given to structure and infrastructure ability to cope with heavy rain.

Hopefully the current "inclement weather" will get developers, consultants and buyers alike to pay attention to keeping water out of home and shelter--something naturally taken for granted in most parts of the wolrd. To pay half a million dollars (US) for a 3-bedroom villa or 2-bedroom apartment and then spring water leaks when it rains is absurd, and the companies and developers responsible should take full and immediate responsibility or face lawsuits. This isn't a case of constructing new islands in the sea or kilometer-high towers. It's the simple matter of keeping water out when it rains.

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On the Heels of a New Property Law

Reports that the much awaited property law is just around the corner have become more compelling with some expecting the new law to be introduced by the end of February 2006---at the conclusion of the 40-day mourning period for former Dubai ruler Sheikh Maktoum bin Rashid Al Maktoum.

One expectation is that the designation of "freehold" will be granted only to those properties that fall under the auspices of the three government affiliated developers, Nakheel, Emaar and Dubai Holdings. A question arises, however, over projects like those in Dubai Marina and Jumeirah Lake Towers which, while part of master-plans created by the major developers, house a large number of towers being built by private developers. Will buyers among these projects be offered freehold ownership, or be limited to a 99-year leasehold?

A second expectation, and one of unambiguous benefit, is that property buyers will at last be able to register titles to their purchases with the Dubai Lands Authority, a procedure that has been in limbo since the right of property ownership was first announced in May 2002.

The effect of the new property law may be to spur more activity in the property market on the one hand, due to greater legal clarity, or there could be a cooling off effect on the other hand, if a large number of projects are deemed to be leasehold as opposed to freehold. The notion of freehold has been heavily promoted by developers to lure buyers, who if given anything less may feel betrayed. Some may even seek to divest and prospective buyers may feel led to reconsider.

The fact, however, that it will finally be possible to register purchases will be well recieved. Many prospective investors it would seem are waiting in the wings for this. Depending on just how many such fence-sitters there are, there could be a sudden influx of new buyers.

A greater as opposed to lesser availability of freehold properties is what most would hope for and it would seem to be the most logical step for the Dubai government to take. Selling off to foreigners or non-residents a piece of property which is virtually in the air, as would be the case with apartments in towers, or parcels of land on the newly formed off-shore islands would still leave most of the original land mass of the Dubai emirate untouched. So why shouldn't these properties be granted to whomever wishes to acquire them on a freehold basis?

In a practical sense there may be little difference between ownership on the basis of freehold as opposed to long-term leasehold, anyway. What percentage of apartment towers, or villas for that matter, will remain intact beyond 99-years? Will the island developments (products of land reclamation) even remain above water? Most likely the substantial investment required over time to maintain the buildings and reclaimed lands may make them cost in-effective in 100 years time. thus negating the value of freehold over leasehold. That being said the term "freehold" seems to have more capital value for reasons of emotion as much as anything else--it just sounds more valuable than "leasehold." But, if buyers are more rational than they are emotional then either offering should be acceptable.

Poll

Free polls from Pollhost.com

As an investor or potential investor, would you be put off by a designation of leasehold as opposed to freehold on a property purchase?

I would not want anything less than freehold.    A 99-year leasehold would be an acceptable option.

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What if They Don't Come?

"If we build it they will come... but what if they don't?" This is how the recent decision by Dubai ruler Sheikh Mohammed bin Rashid Al Maktoum to put a halt on new construction projects associated with Dubailand might be characterized. In fact it appears the decision will affect new developments across Dubai. Construction Week publication quotes a senior business development manager of Dubailand saying, "Sheikh Mohammed has asked for a slow down of projects across Dubai--there is too much going on all at once." Meanwhile, reports coming from people involved in Dubai Marina projects indicate that Sheikh Mohammed is urging the quick completion of projects there--by 2009.

 Towers rising in Dubai Marina, 31-Jan-06

What are the implications of these apparent directives? For Dubai as a whole it could mean a significant scaling back of some of the grandiose projects already announced--and the cancellation of some not yet announced. Along with such a scaling back should probably go some of the seemingly pie in the sky projections of growth in population, tourism and the like. Indeed, there have been projections of visitor growth reaching 160 million per year in connection with the creation of the new Jebel Ali International Airport--projected to be, of course, the largest airport in the world. That would be quite a substantial increase from the 5 million or so who visit at present.

 Laborers in Dubai Marina awaiting transport, 31-Jan-06

Does this tarnish Dubai's recently garnered image as a place where grandiose dream projects become reality? The up and coming Burj Dubai, the prospective tallest tower in the world, is presently at 25 floors and rising a floor per week. The first of three Palm islands is nearing completion although behind schedule, and countless other projects, most notably the Jumeirah Beach Residences and other towers in the Dubai Marina are nearing completion. The fact is that an incredible amount of project work is already underway. The recent statements by Sheikh Mohammed, which might be seen to call for a pause in Dubai's march to have the biggest, tallest, and best of everything, is arguably a much needed return to earth.

 JBR towers under construction in Dubai Marina, 31-Jan-06

There doesn't seem to be any concern or alarm over the statements in the local media. It seems instead to be regarded as a reasonable response to the seemingly unending stream of announcements of new and ever-grander schemes. As provided further in the directive, the ruler wants to see the completion of more projects before new once are offered. This seems to make good business sense, even while being in contrast to the "more is better" attitude that has prevailed till now.

There has been constant concern over a possible glut in the property market in light of all the projects coming up concurrently. Now, we are seeing the first substantial action by the powers that be to address this concern. It may well be said that the day Dubai decided to put the brakes on its unprecedented building spree will be seen to mark an important turning point, and one that may play a critical role in the eventual success of its building plans. Sheikh Mohammed's timely pronouncements, just weeks after taking over as official ruler of Dubai, seem to represent a positive move. Perhaps not so much concerned that they may not come, H.H. Sheikh Mohammed seems more likely concerned that all is in place for when they do come.

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