B&E UNDERTAKES A FINANCIAL PRIMER ANALYSIS ON THE ECONOMIES THAT HAVE A HIGHER PROBABILITY OF COLLAPSING THAN DUBAI... AND SOME MORE!
As Dubai stepped up on the construction-led growth and started showcasing to the world that something almost impossible could be achieved in a desert land, investors and investments started pouring in. In return, Dubai merrily kept riding upon cheap money that flowed in from various parts of the world – particularly Europe and Middle East. Gradually, Dubai started suffering from the ‘est’ syndrome, which defied basic economics. Whether their markets needed it or not, everything they constructed had to be the tall‘est’, long‘est’, high‘est’, bigg‘est’ et al. So starting from the biggest manmade ice skating rink, to the tallest building in the world, to the biggest manmade islands, to the longest shopping malls, Dubai, in the name of grandiose and opulence, created everything that man had ever dreamt of. Such was the scale of the construction drive that it is estimated that almost 60 percent of global cranes were working in Dubai till sometime back!
It was not that all investors were sold on the Dubai idea.
It was only those who got sold on the dream that Dubai created, and those who wanted to make a quick return on their investments, who were the ones who got drawn to this fairytale island. But then, there were certain sections of analysts who always found the Dubai market extremely intriguing. It is estimated that during the peak of investments flow into Dubai’s real estate, almost 30 percent of office area lay vacant on both sides of the Sheikh Zayed road – the central business district of Dubai. But still, Dubai kept on piling more space and raising old spaces to create new ones. And what was more asynchronous was the fact that real estate prices kept on spiraling northwards in the meanwhile. This was kind of strange as it meant that demand was being artificially created by restricting supplies of already built-up spaces. Thus, in their quest of creating a dream destination for investors, Dubai forgot two basic principles: First, in any market, artificially created imbalances cannot sustain for long (They can sustain till the time investments are flowing; and those too cheap ones).
As Dubai stepped up on the construction-led growth and started showcasing to the world that something almost impossible could be achieved in a desert land, investors and investments started pouring in. In return, Dubai merrily kept riding upon cheap money that flowed in from various parts of the world – particularly Europe and Middle East. Gradually, Dubai started suffering from the ‘est’ syndrome, which defied basic economics. Whether their markets needed it or not, everything they constructed had to be the tall‘est’, long‘est’, high‘est’, bigg‘est’ et al. So starting from the biggest manmade ice skating rink, to the tallest building in the world, to the biggest manmade islands, to the longest shopping malls, Dubai, in the name of grandiose and opulence, created everything that man had ever dreamt of. Such was the scale of the construction drive that it is estimated that almost 60 percent of global cranes were working in Dubai till sometime back!
It was not that all investors were sold on the Dubai idea.
It was only those who got sold on the dream that Dubai created, and those who wanted to make a quick return on their investments, who were the ones who got drawn to this fairytale island. But then, there were certain sections of analysts who always found the Dubai market extremely intriguing. It is estimated that during the peak of investments flow into Dubai’s real estate, almost 30 percent of office area lay vacant on both sides of the Sheikh Zayed road – the central business district of Dubai. But still, Dubai kept on piling more space and raising old spaces to create new ones. And what was more asynchronous was the fact that real estate prices kept on spiraling northwards in the meanwhile. This was kind of strange as it meant that demand was being artificially created by restricting supplies of already built-up spaces. Thus, in their quest of creating a dream destination for investors, Dubai forgot two basic principles: First, in any market, artificially created imbalances cannot sustain for long (They can sustain till the time investments are flowing; and those too cheap ones).
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
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