Last year this week, I spent the day driving around the construction site called Dubai.
Riding around town with my friend there, our tour was interrupted by a cell phone call. My host had learned that Nakeel (one of the Emirate’s 2 development companies) was offering 90% of consumer buyer’s earnest money deposits in refund if the money was claimed by the end of the week.
My host had a 20% down payment deposit on two condos in Dubai. We raced to the developer’s office and he was presented with a check for 90% of both condo deposits on the two condos which had not yet been constructed. The project was later canceled. But many other condo towers were already standing and dark at night, no one home.
As I wandered around Dubai, I asked many people, who lived there. What made this sparkling city in the foot print of Miami (the street plan is very similar) and Vegas (the architecture is so very similar) so ‘booming’? (Of course the boom was just ending in December 2008).
What factoid that I learned while talking with those ‘in the know’ was the Iranian citizens who owned thousands of condos and businesses in Dubai. Dubai is a Western friendly gateway and port. If you live in Iran (or Pakistan, Afghanistan) you may fear instability in your country, much the way those in Venezuelans do, and buying in Dubai or Miami makes a lot of sense.
Dubai like Miami allows a safe haven and trade access to the developed world. The similarities don’t end there. The condo boom in both cities were driven largely by foreign buyer demand for second homes. The condo boom-bust in both cities will get a second act, Miami had its bottoming out last fall, Dubai may be slacking lower today.
In 2006, I helped found the National Association of Condo Hotel Owners here in the USA, in 2008 we discussed opening a franchise in Dubai. Second homes are best when they are affordable and useful. Condo Hotel does offer a way to optimize your use, and reduce the cost of your second home. It is not a perfected form of ownership. The great boom in condo values, stripped second homes of affordability for many consumers. But the bubble has burst, and prices are down (way down in some cases, below cost to construct).
Second homes have become affordable again, in Miami and Dubai. If the inflation appears that many experts predict, watch those condo values re-inflate as demand returns… Will it happen overnight? Maybe sooner than most people think.
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