Thursday, October 04, 2007

Du-buy

Yesterday, I asked how rents in Dubai could be so high, given that the city is one enormous construction zone. Fellow U-Chicago alum, Megan McArdle, ventures:
doubling oil prices have pushed up many incomes in the businesses that cater to the oil industry, which in Dubai is nearly all of them, so that even skyrocketing supply is not keeping up with demand. I'd also expect that the flow of oil money has encouraged people in other parts of the Middle East to seek apartments in Dubai (as well as New York and London and Paris, which is one of the reasons real estate markets are so robust in those cities).
If prices are going up, it means that demand is somehow outstripping supply. And if supply seems to be robust, then demand must be even fiercer.

Dubai actually has little oil money, but that's certainly not true for Abu Dhabi, up the road, or neighbouring states like Qatar, Bahrain, and Saudi. If folks from those countries are deciding to move to Dubai, it's because the city seems to enjoy a temporary regional monopoly on sanity, and pleasantness. It's remarkable what a government can accomplish if it selects property development as being its primary goal, and focuses on that. Hopefully Dubai may start a trend in the region.

Or maybe they are just a bunch of guys, loaded with petrodollars, trying to outcompete each other.

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