Can the Dubai construction boom last?

Dubai has always been a building site as long as residents can recall, but these days even the old timers are scratching their heads.

It is certainly a boom, probably the biggest since Sheikh Rashid ordered the construction of Jebel Ali Port two decades ago. Moreover, this time the whole boom is underpinned by commercial logic and solid business planning, and not booming oil revenues.

Looking out of the window of AMEInfo's brand new office in the Dubai Media City, and listening to the banging of hammers below, there is quite a panorama. The new hotels next to the Royal Mirage are nearing completion, the Palm Island is sprouting out into the Gulf, and the Knowledge Village will be a low-rise across the frontage of the AMEInfo building.

Peer from the rooftop and the six towers of the Dubai Marina apartments are half completed, and further up the piling has started on the Jumeirah Beach Residence. Several hotels and more apartments are also going up in this area.

Cross the Sheikh Zayed highway and Emaar Properties is building a new town of thousands of villas, the Emirates Hills and Emirates Lakes, home to this correspondent. And nearby are the further phases of the Dubai Internet City and Dubai Media City. Where on earth is all the money coming from?

On the Emaar side, the answer is easy. The $3 billion initial public offering five years' ago left the company cash rich. Projects like Palm Island and DIC are Dubai government territory, and usually funded from the cash flow of the preceeding project.

Will it all end in tears? Like all good things, booms have to come to an end. But that will probably not be for some years hence. Once all the Dubai residents who want a villa have reserved one off plan - which is what they have been doing in the thousands - then Emaar might slow its building programme, or even, perish the thought, actually take the risk of not finding a buyer and building speculatively.

In other parts of the world property companies often build on a speculative basis and that is why they get into trouble. For one day the music stops and the buyers disappear - an interest rate hike, perhaps - and the property developers are left with empty houses and big debts.

So far in Dubai developers have huge demand and forward sales and cash in the bank. This is hardly the stuff of a property collapse.

There is also much reason to be cheerful about the emirate's economic future. The Dubai technology and media free zone will employ around 50,000 staff within two years, and the even more ambitious Dubai International Financial Centre is coming up quickly behind it, another $2 billion building project.

Such white-collar wealth will surely be a solid foundation stone for the nascent housing market - and freehold ownership for foreigners is only a few months old - and cements Dubai's status as a regional hub. A generalized regional political breakdown seems the only credible threat, and Dubai has lived with regional instability since forever.

No wonder all the local banks are keen to get into the mortgage market. This is the Dubai of the future.