Despite Saudi Competition, UAE Thrives as Middle East Business Hub
If real estate is anything to go by, Dubai is snubbing its nose at Saudi efforts to replace it as the Middle East’s go-to business and expatriate hub.
Saudi Arabia’s insistence that corporations doing government-related business in the kingdom, many of which have their regional base in Dubai, move their offices to Saudi Arabia by 2024 has yet to dampen the appetite for Emirati real estate.
This month, the kingdom eased its rules on countries moving their offices to Saudi Arabia by exempting companies that are sole bidders on a government contract and have enterprises with annual foreign operations worth less than one million Saudi riyals ($266,000).
Similarly, big-ticket Saudi projects have so far failed to dent the Dubai real estate market. Prominent among those projects is Neom, a US $500 billion futuristic, 25,000 square kilometer desert city on the Red Sea.
Saudi Crown Prince Mohammed bin Salman (MBS) expects Neom, which seems more like a vignette in a science fiction novel than a real-world project, to become home to nine million people.
In addition, the new city’s slated to host the Middle East’s first international winter sports tournament in 2029. Neom takes a leaf out of Dubai’s marketing strategy that has successfully touted the Emirate’s projects in superlatives.
Conceived as a linear metropolis, Noem envisions creating 15 islands, the “largest marina on Earth,” and featuring a commitment to sustainable energy and turning 95 percent of the city into a natural reserve. If indeed built as envisioned, Noem will run on 100 percent renewable energy with no carbon emissions, have no roads or automobiles, and retain most of its area for wildlife thanks to its smaller infrastructural footprint.
Meanwhile, Dubai’s real estate market is soaring.
In October, Indian billionaire Mukesh Ambani bought 5,534 square meters of land priced at $163.4 million on Palm Jumeirah, an artificial island populated by glitzy hotels and posh villas and apartment towers. Ambani also acquired an $80 million mansion for his youngest son.
Weeks later, a mystery buyer purchased an eight-bedroom, 18-bathroom villa on Palm Jumeirah for $82.4 million.
A large influx of ultra-high-net-worth, often cash-paying individuals, many of them Russians, fueled real estate demand in Dubai that last year drove prices up by 70 percent. The freewheeling deals were one reason why the Financial Action Task Force (FATF), an anti-money laundering and terrorism finance watchdog, put the UAE on its grey list.
The FATF has since said that as a result of reforms, UAE, keen to be seen as a transparent international financial hub and a model global citizen, had become “compliant” with 13 of its 40 recommendations, “largely compliant” with 23 recommendations, and “partially compliant” with four.
Even so, Dubai appears to have no intention of publicizing its property registry. Critics assert authorities have little incentive to increase oversight or transparency because that would dampen interest at a moment when Saudi Arabia is seeking to unseat the Emirate, at least as far as corporate businesses are concerned.
Beyond Russians, recent buyers include cash-rich Gulf nationals, Israelis, people leaving China since the easing of Covid-19 restrictions, and those shifting their operations out of London in the wake of Britain’s exit from the European Union.
In a statement last year, the UAE said that it “takes its role in protecting the integrity of the global financial system extremely seriously. This includes embedding a clear regulatory framework for real estate brokers,” who are obliged to file reports to the government’s Financial Intelligence Unit for real estate purchase and sale transactions.
Overall, the Dubai real estate market has witnessed its up and downs. Many see the 2008-2009 crash as the fallout of the global financial crisis, even though research by major real estate companies, partly due to activity in the UAE, predicted a downturn before and independent of the economic collapse.
Analysts caution that debt refinancing because of the rising cost of borrowing poses a threat to the Dubai real estate market, but developers are less concerned.
“Do I worry about a tsunami or typhoon? Well, it’s like the pandemic, no one saw it coming, but it came. You can’t really worry about that,” said Murat Ayyildiz, chairman of Alpago Properties, a Dubai luxury property developer.
Dr. James M. Dorsey is an award-winning journalist and scholar, an Adjunct Senior Fellow at Nanyang Technological University’s S. Rajaratnam School of International Studies, and the author of the syndicated column and blog, The Turbulent World of Middle East Soccer.