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alstry (35.77)

Dubai starting to Du Cry???

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November 30, 2008 – Comments (5)

From the WSJ:

DUBAI -- Layoffs are mounting in this city-state's property sector, with one of Dubai's most ambitious government-owned developers announcing big job cuts Sunday.

Dubai-based developer Nakheel said Sunday it shed 500 jobs, or 15% of its workforce. In a statement Sunday, the company said it was scaling back work on its projects "to accommodate the current easing market conditions."

"We have the responsibility to adjust our short-term business plans to accommodate the current global environment," the statement said. The company didn't specify where the job cuts were being made or which projects were being scaled back. The company previously said it was looking at slowing work on one of three palm-tree shaped island developments it is building.

Also on Sunday, Morgan Stanley said it had let go of 10-15 staff from its roughly 110-person Dubai office. The banking layoffs come just months after several big Western banks started beefing up their staff here. International banks had hoped to mine the region for deals and fees that have become hard to come by almost everywhere else in the world.

And last month, another big developer Damac Group, said it was shedding 200 staff, or 2.5% of its workforce.

A layoff in Dubai can be much more problematic than in other places. The United Arab Emirates has a population of 4.4 million, but less than 20% are estimated to be citizens. Expatriates do most of the work -- filling everything from low-paid construction jobs to midlevel and senior management positions. Expatriates are required to find new jobs within a month or leave the country.

Even Dubai is feeling the pinch.  Indoor ski slopes, building islands in the ocean in the shape of palm trees, disney in the desert???????

There is no escaping deleveraging....even in a place like Dubai where most is paid in cash.  Money is evaporating and few really know how do deal with something they have never seen before.

5 Comments – Post Your Own

#1) On November 30, 2008 at 3:24 PM, dinodelaurentis (58.40) wrote:

not a Brave New World but a New World Order.

ya gotta love it. the world turned upside down... :D

soon even the uber-rich will be thinking "what the hell did we waste all that money on?"

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#2) On November 30, 2008 at 11:28 PM, DemonDoug (99.00) wrote:

Funny thing about dubai, they made a lot of money with their oil exports, but their wells are basically dry, they don't export oil at all anymore.  All their money they make as a business center with favorable tax rates, and they court big business, hence their prosperity (no other middle eastern country is as accomodating as Dubai).

The man made islands... i remember seeing a documentary on them.  You can see them via google earth and google maps.  They're basically mcmansion trackhouses out there, with no real business around them.  I think I remembered seeing that only 10-15% of those homes actually had people living in them; the real estate agent was talking about "foreign investors" buying the homes there.  All I could think of was "suckers!"  I can't even imagine what would happen if a typhoon or a tsunami or a rogue wave hit dubai/uae.  Pretty much seems like the dumbest, most toppiest use of overspeculation ever.

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#3) On December 01, 2008 at 12:25 AM, alstry (35.77) wrote:

Demon,

I couldn't have said it better myself.

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#4) On December 01, 2008 at 1:55 AM, StockSpreadsheet (74.04) wrote:

Demon,

Dubai/UAE doesn't get many tsunamis or rogue waves due to the geography.  The Straits of Hormuz is too narrow to let too much water in without a lot of its energy being dissipated due to the turn the waterway makes from the Persian Gulf to the Sea of Oman and on to the Indian Ocean.  A typhoon would also normally be limited due to the same geology.  This is a reason that they didn't get hit with the tsunami waves from the Indonesian earthquake a while back while Eastern Africa got hit fairly hard.  They also don't tend to have too many close earthquake faultlines to worry about generating local waves.  The nearest faultlines are in Northern Turkey, down the Red Sea and down through Pakistan, though there is one a few hundred miles south of Yemen/Oman in the Indian Ocean, but I have not heard of a quake there in recorded history, whereas the Indonesian, Turkish and Indian/Pakistani faults quake with some regularity.   Dubia/UAE do get some large waves and storms though, as stated on the documentary, but 50 foot waves are pretty much unknown in the Persian Gulf.  (Otherwise, most of the UAE, Kuwait, Qatar, Bahrain and Eastern Saudi Arabia would have been levelled years ago.)

That being said, when I watched the documentary, I thought it was a screwy way to build land.  All the homes are isolated.  You would have to take a boat to go shopping, go to work, take the kids to school, etc..  I guess if you are super rich, you can just have your butler drive the boat and don't worry about the fuel.  Just seems an inconvenient way to live unless you are trying to get away from everyone and everything.  (Major embezellers, forgers or bank robbers, or fleeing dictators or drug kingpins, this might be your choice home location.)   

As for other places where "suckers" often buy and build homes, think Padre Island and the other islands off Texas and the islands off the Carolinas.  You could probably throw in most of the Florida Keys in that same boat.  All are reasonably frequently hit by hurricanes and often suffer a lot of damage.  I saw one news report several years ago saying that people weren't allowed to build in the Carolina barrier islands because nobody would loan them money to build housing there anymore.  The government stopped insuring the homes, and no insurance company would touch them with a ten-foot pole.  Some homes had been wiped out multiple years in a row and the people just kept collecting the insurance money and rebuilding on the same spot.  They were complaining about the fact that they couldn't build their vacation home there anymore since the government wouldn't fund the rebuilds, no insurer would insure them, and they didn't have the money to rebuild on their own each year after their house got levelled by the storms.  They were complaining that this was unfair and that the government was depriving them of life, liberty and the pursuit of happiness.  I thought they should find a safer place to build.

Thus, I don't think the people buying homes on the Dubai islands are that much dumber than a lot of the people that buy houses in the Keys, the Caroline barrier islands or the Texas barrier islands.  The locations in America are much more frequently hit by severe storms than locations such as Dubai.  On the other hand, all of the U.A.E. has a lot of undeveloped land if you just move a mile or so away from the Gulf.  It seems to me if you could spend all that money building those islands, you could put in a few solar power and wind power generators, a few desalination plants and build more housing inland, surrounded by lush gardens fed from the water from the desalination plants, and the transportation to jobs and schools would be much easier.  

Just my two cents.

Craig 

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#5) On December 01, 2008 at 10:43 AM, tdoodler (24.57) wrote:

FYI:  Lenders didnt/dont have a problem with loans on the Carolina barrier islands.  The potential lies with the environment.  In essence, I believe they will only insure you for the cost to rebuild a similar home - as  opposed to market value.  The value is in the land/location.

 

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