Really depends what you want to do.

Given Gulfi attitudes to work and low wages in Egypt, if you want to find people to do the long, mind-numbing and laborious work of Arabic software localisation then Egypt is the only place that makes sense. There were never going to be enough Emiratis for it to make sense to base those kinds of ops in Dubai.

If you want to sell to the region, on the other hand, Dubai makes a lot of sense.

That's only the tip of the iceberg. A lot of the firms moving out of Dubai won't officially dare to admit it. Take Microsoft. They moved/are moving their regional HQ to Bahrain because of the cost of Dubai. They will keep some staff in Dubai of course, and they will keep the free building they were given in Dubai Internet City, and Dubai authorities obviously won't ever admit they've gone. The silence suits both sides.

One of the main reasons for Dubai becoming too expensive is the cost of staff accommodation: the soaring rent rises of the past two years. The Dubai government has now brought in a cap (and a freeze on further rises on rents that went up last year) but it's too little too late. Quite apart from the fact that the main reason it was done is because the property market is already softening, and is believed to be a few steps away from freefall.

Much of this happened because of greed and bad planning. They knew how to build affordable accommodation, but after a couple of initial projects (such as Nakheel's The Gardens) the focus was solely on luxury high-end. Give it another five years when things start to crumble and tumble (quite literally), and Dubai might become competitive again.

How d'you manage to weather the rent hikes, Istara? (I don't expect you to actually answer that, obv.)

I keep coming across people who've been to Dubai just the once and have bought off-plan property, even recently. It's scary.

Anyway, you've got me wondering about what a financial collapse in Dubai would actually look like in practice. Any thoughts?

Water me man:

Yes and no with respect to development. Around six or seven years ago, I was investment officer on a code shop - whose name I shall not cite, but it a genuine success story known in the region now - which was bringing in code monkeys to Dubai from Egypt, Jordan, Leb Land, etc.

At that stage, the overall advantages were for locating them in Dubai (not just pure salary, but problems operating in Egypt, etc).

Now my analysis would be entirely different.

My criticism here is that Dubai has, as Secret has underlined, rapidly priced itself up out of a key area for its long-term development by pure bad planning. The rise in the cost basis in Dubai in the past decade is not substantially attributable in my opinion to organic economic growth, but a speculative frenzy on the real estate end, combined with the hidden costs of a transport infrastructure that was sufficient and even excellent in 2001, but in 2007 is insufficient and a positive drag.

As for a Dubai collapse, hard to say since so much is in the black box, and given the money the Family has, can be in part hidden.

But they had better stop the crazy building and start investing in more business-rational infrastructure.

That's interesting. My relationship with the region only really started about 3 years ago, so was baptised in the era of Mr Clean heading up the MICT over in Egypt and probably internalised some of his talk as his role in the govt grew.

I agree with you both on the real estate bubble - I could never get my head around the idea that planners could seriously be encouraging off-plan flipping, though their subsequent (and pretty weak) crack-down on flipping makes me wonder if they just hadn't thought about it hard enough.

It's a pity, because some of their ideas actually make a lot of sense. The Logistics City, for one, I thought was inspired.

If rental prices have shot up over the last few years, isn't that because demand for these properties has increased relative to the supply of available properties? If that is the case, then I don't see how implementing rent controls is going to help given this will have the effect of dissuading developers from building new housing. Given that rent controls can also have the effect of discouraging property owners from carrying out capital works on existing properties, there is also the risk that the overall quality of rental housing in Dubai will also go down.

Amir:

If rental prices have shot up over the last few years, isn't that because demand for these properties has increased relative to the supply of available properties?

In a non-transparent market which shows all the signs of speculative manipulation - e.g. withholding supply - and from speculative pricing based on flipping of properties for ever rising prices, rent controls may help put a brake on a speculative bubble in real estate.

May.

As to your observation:
going to help given this will have the effect of dissuading developers from building new housing. Given that rent controls can also have the effect of discouraging property owners from carrying out capital works on existing properties, there is also the risk that the overall quality of rental housing in Dubai will also go down.

I would normally be sympathetic to this argument.

However, Dubai is not a market that I see being driven by market-clearing supply and demand.

I also very much doubt that investment in real estate in Dubai is being driven in any shape or form by rational return analysis.

As such, afraid I regard your response as rather theoretical.

How d'you manage to weather the rent hikes, Istara? (I don't expect you to actually answer that, obv.)

Why - do you think I've taken on "evening work" to make ends meet?!

I am incredibly lucky enough to be in The Gardens, where rents are the lowest in the whole of Dubai. For my spacious two-bedroom flat I pay about half of what most people pay for a one bedroom. My rent didn't even go up this year, it's still only Dh30,000/year (plus around Dh5,000 in air-conditioning charges, but that is paid via utilities bills).

Oh, I was just being facetious. I'd forgotten that you were lucky enough to be in the Gardens. I hope you're not in the bit they're knocking down!