Dubai still a safe haven in a troubled region

Immigration into Dubai is governed by commerce and not politics and under the local Labour Law it is essential to have a job to stay in the emirate.

However, with a booming local economy and a government committed to maintaining peace and security as its number one priority, it is not so surprising that many people have moved to Dubai and continue to do so. Indeed, annual population growth in Dubai is around eight per cent as a consequence.

This continues to put serious pressure on the existing stock of real estate, and the doubling of rents in recent years is the outcome. Government efforts to cap rental increases at 15 per cent this year have enjoyed mixed success, with some landlords threatening eviction as an alternative to paying higher rents.

Safe haven status

Now clearly if Dubai's status as a 'safe haven' in the Middle East grows so will the pressure on its housing stock. It is a sad but obvious truth that people tend to move away from danger zones and towards places where their families will be safe from potential harm.

That military conflicts in the Middle East also boost oil revenues is another sorry story but again it is true. GCC oil revenues were already on course to be $80 billion higher in 2006 than 2005, before the start of the current problems in Lebanon and Gaza. How much higher will they be if the record oil price of $78-a-barrel is not just maintained but goes higher?

It is easy enough to conclude that this excess liquidity will at least be partly invested in Dubai real estate this autumn, where rental yields are high and the political situation very stable. And the additional demand from those unfortunate people now caught between warring factions and looking for a safe haven will increase demand in an already tight market.

Improving legislation

Against this background the Dubai Government continues to improve the legislation surrounding property ownership in the emirate, with the provision of escrow accounts for off-plan projects the latest initiative to surface. Expect laws for fractional ownership or 'time shares' soon.

To some extent the Dubai Government has always followed the mantra 'build and they will come' and it is a sad commentary on the times we live in that what is extremely negative for the development of some countries in the region can actually benefit another place.

Is this not like Hong Kong and Singapore which benefited hugely from an influx of the brightest and most talented Chinese fleeing the maelstrom of communism? Certainly at moments like these there is at least a superficial parallel.