One of the more perverse effects of the September 11th tragedy has been a withdrawal of capital from Western markets by Arab investors. The greater transparency and disclosure levels demanded by the authorities have not proven acceptable to everybody.
But Dubai real estate has definitely benefited from the hunt for alternative investments. Just how much capital has come back to the Middle East from Western markets since 9/11 is a source of some debate.
But last week the chief executive officer of Dubai Holdings, Salman bin Dasmal told the Australian Business Group in the Gulf's luncheon that according to his organization's best estimate around $300 billion had returned to the region, out of around $1 trillion held overseas at the time of 9/11.
He said that most of this money had returned to Saudi Arabia, and from there a lot had found its way into Dubai real estate, as well as regional equity markets. This is not a new observation, though the figure of $300 billion is new and a bit higher than most observers' estimates.
For those considering the purchase of Dubai real estate this inflow of cash is a mark of external confidence in the emirate and the way it does business. Even investors awash with cash do not generally put it into places they consider at risk.
On the other hand, this inflow of investment is certainly encouraging Dubai to go ahead with its building plans at a faster rate than would have been the case otherwise. Mr. Bin Dasmal gave the example of Dubailand, the giant theme park being built outside Dubai; this project has raised $6 billion in one year, which was its budget for five years.
This is surely an important point for home buyers. If you buy today knowing that there is an enormous amount of development and investment to come in the near future, then is your risk not lower than it would be if such investment was not in the pipeline?
Put it another way, if you thought you were going to be the last person to buy a house would you do it? Of course not, you would be worried about getting the worst deal or paying the highest price.
Thus there is a measure of comfort in knowing that the enormous flow of funds that is fuelling the Dubai construction boom is not going to run out anytime soon. And it makes sense to get in early on during a boom period; you do not want to be the last person to buy before the market changes direction.
Of course, there is a danger of overbuilding with such a large amount of investment capital available to developers. However, the important thing to note is that this factor also pushes back the 'Day of Reckoning' by how much, a few more years?
Hence unless you are prepared to carry on paying rents ad infinitum, or at least until the market eventually undergoes some sort of a correction, then the risk is still larger for those outside the Dubai property market than those who have bought or who are about to do so.