Marginal Revolution: My favorite things Dubai

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My favorite things Dubai

Brazil_1 No, I can't afford to stay here, but surely this is my favorite Dubai hotel. I am told they pick you up at the airport in a white Rolls Royce and then the bridge to the hotel spouts a burst of flame to welcome you. Supposedly from the water it looks like a cross, which makes it a controversial structure with the local Muslims. I am going there shortly to eat lunch, if I can believe my guidebook this adventure will involve the use of a submarine.

So far, the Pakistani food here is excellent...and, um...they have a few green median strips along the road, albeit not at social marginal benefit = social marginal cost. As to my favorite Dubai novel or film, I'll have to get back to you.

I can tell you one thing, my favorite Dubai blog is Emirates Economist.

Addendum: Chris Masse points me to this link of Duba's mega-projects, take a look. Here is an overview photo. Here is the story. By the way, the UAE just had its first race with the robot camel jockeys.

Posted by Tyler Cowen on July 22, 2005 at 05:02 AM in History | Permalink

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Comments

Sorry to disappoint you, but there is no submarine, just a very funny imitation, because the restaurant itself is located in the hotel, not outside. Do not forget to visit the bar at the upper floor - views are stunning.

Posted by: Boris Lvin at Jul 22, 2005 1:57:43 AM

But does any of this stuff make any economic sense, or is it just oil billionares having a good time? When that money runs out is there anything useful left?

Posted by: Matt at Jul 22, 2005 2:01:10 AM

I have a close friend who worked in Dubai as an upper-level bureaucrat for about a year. From the stories he's told me, it sounds like the country's economy is mostly rent-seeking aimed at the royal family, who in turn are not particularly rational in how they cause the government to spend money.

Posted by: John P. at Jul 22, 2005 9:36:20 AM

You have to remeber, Dubai is not directly funded by oil. Dubai's extravagance has been BACKED by the oil revenues of Abu Dhabi, rather than by development loans from the IMF.

The business model of Dubai is to have a place where oil money is recycled and is almost entirely investor owned but will be self-sufficient. Their expected and actual returns are from whatever businesses and industries they can set-up in the urrent boom period.

Posted by: Desert Island Boy at Jul 22, 2005 10:50:12 AM

Any danger of telling the readers the name of the hotel? A little frustrating.

Posted by: James at Jul 23, 2005 7:03:03 AM

Read the rest of Mike Davis' report.

It's all money laundering. As fast as they're building this cr*p, they're selling it off, often for large volumes of cash.

The paper tiger will collapse when the construction finishes.

Harry

Posted by: Harry Barracuda at Jul 25, 2005 4:12:50 AM

Thinking of buying a villa in Dubai? Think again!
By Samir Khosla, eDynamic LLC (samir.khosla@edynamic.net)

In 2002 the Emirate of Dubai took the unprecedented step of giving foreigners the opportunity to purchase selected properties. While the property available for purchase was termed as “freehold”, it essentially equated to a 99 year leasehold arrangement. After a sluggish start, in the last 3 years property transactions in Dubai have increased exponentially. The Dubai property market is unique, especially since it is nascent and is not subject to the same market forces as western markets.

Financing your property in Dubai:

1. UAE Institutions are offering mortgages to GCC residents as well as non-residents
2. Most institutions require between 1-3 years local salary history for residents or a 5 year’s history for overseas residents
3. For Dubai residents the minimum down payment is 10% whereas for overseas residents the minimum down payment is 30%
4. Typically mortgages offered are 60 times of monthly salary to a maximum of between AED 3.0 - 5.0 Million
5. The typical debt service ratio expected is between 35- 55% of salary
6. Terms are between 5 and 15 years for non GCC citizens
7. Interest rates are determined based on 4.99%+DIBOR (Dubai Inter-bank) and the lowest currently (August 2005) stands at around 6.49%

As an example, to buy a villa in Arabian Ranches where the average price for a 5 bedroom is US$600,000 - 700,000.00 the 30% down payment will be US$210,000.00 and the monthly payment will be US$ 5140.00 for 15 years

Now consider that based on classifieds in Gulf news, to rent the same villa in Arabian Ranches for 1 year the price would be about $3700.00 – $4000.00 per month.

Based on this limited information, we need to think about what will happen up ahead. Villa prices have increased by 22% (http://www.ameinfo.com/64650.html) vs. those of apartments which declined by 7%, rents have shot up by up to 40% (http://www.ameinfo.com/63768.html) The one caveat to using ameinfo’s information is that they rarely talk negatively about the property market. We need to use market information to assess whether a mortgage payment of $5000 + opportunity loss of $210,000, coupled with the prospect of property appreciation is a reason enough to buy in Dubai VS doing something else with this money like renting in Dubai and investing the difference at another location.

My assessment is that villa prices are commanding a premium due to the following reasons:

1. Limited number of villa projects have come online when compared to apartments
2. Limited number of villa projects have moved into possession phase when compared to apartments
3. Villa lifestyle suits the Arab socio-cultural setting of a more private lifestyle – therefore more Arabs would look at this as to-live investment rather than a to-let investment

I also feel that villa prices may fall by Q4 05 / Q2 06 due to the following reasons:

1. Very few villas have been brought to market when compared to apartments, in my view villas are appreciating since there are fewer to go around
2. At least 5-6 large, villa projects are currently underway that will be hitting the market by end 2006; not to forget the Palm – on which the frond villas would start opening up by late 2006 – 2007.
3. Arabs will not buy villas with the same fervour with which they bought apartments since a lot of apartments were bought with a to-let intention. Buying apartments to let was a feasible situation since the threshold price for a 1 bedroom is US$80,000 whereas that for a 3 BR villa is US$300,000.00 – also the to-let prices as well as purchase prices for villas would be bearable only to a minute percentage of the Million odd expatriates and other people in Dubai.

Based on this information, I think that it’s probably the time to buy an apartment and not a villa. Further, for those people interested in villas, I think that this is a good time to rent a villa.

Posted by: Samir Khosla at Aug 8, 2005 10:42:06 PM

I totally agree with what you're saying. I wish more people felt this way and took the time to express themselves. Keep up the great work.

William Taggert
http://www.dubaipropertyshared.com

Posted by: William Taggert at Jan 22, 2006 1:19:28 PM

This blog posting is great. Your views are very true. Everyone should start thinking as you are doing.

William Taggert
http://www.dubaipropertyshared.com

Posted by: William Taggert at Feb 8, 2006 4:16:20 AM

his blog posting was of great use in learning new information and also in exchanging our views. Thank you.

Adam Butler
http://www.dubaipropertyshared.com

Posted by: Adam Butler at May 4, 2006 2:37:14 AM

Thanks for this great post. You've got some really good info in your blog.
Chris Scanlon
http://www.dubaipropertyshared.com

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