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Last Updated: Wednesday, 7 December 2005, 23:37 GMT
Dubai's relentless construction boom
By Hannah Hennessy
In Dubai

Luxury building in Dubai surrounded by construction work
In Dubai, noisy construction work is never far away
It is the city of superlatives; a man-made Disney-style creation in the desert, where there's seemingly no such thing as no can do.

Why shouldn't Dubai be home to the Middle East's first indoor ski resort, the world's tallest building, a seven-star hotel in the shape of a giant sail and its first underwater hotel?

These projects - and many more, drizzled by Dubai's voracious public relations industry with epithets such as biggest, best and longest - have either already been built or are under construction in this Arabian kingdom.

Thirty years ago, Dubai was a small fishing port where people came to dive for pearls or trade gold. Now it is one of the fastest-growing cities in the world.

Last year, Dubai's economy grew by almost 17%, four times faster than that of the United States and twice as fast as China's.

Capital gains

So, what is the secret of Dubai's Midas touch?

Dubai at night
Traffic is heavy in Dubai, even at night

Most obviously, it's black gold. It has benefited from the biggest boom in oil prices in a generation.

The increase in fuel prices has fuelled a construction frenzy, the like of which most countries in the world have never seen.

Whereas many places have benefited from the growing appetite for oil, nowhere has done so quite like Dubai.

"There's masses of liquidity and it's a tax free environment," explains Brian Scudder of Oryx Real Estate, a company that provides luxury accommodation in areas of Dubai like The Palm, a manmade tree-shaped island in the ocean.

"Dubai isn't hamstrung by the same bureaucratic processes that affect other places.

"The mentality is very ambitious, there is little government intervention and although it's very cut-throat, it's very efficient in getting things done."

Inflation threat

In the last decade, thousands of people have moved to Dubai, drawn by its free market economy and the promise of year-round sunshine.

Tall buildings in Dubai, with a backdrop of cranes
Bigger and taller buildings are appearing everywhere

It has become a regional hub for business as well as tourism, because it is regarded as a safe place for multinational companies to base themselves and be within striking distance of the rest of the Middle East.

But this influx has put pressure on its infrastructure.

One of the frequent complaints of its residents is that the city has grown too big too quickly.

Residents say the roads are almost permanently clogged, and living in Dubai is like living in a giant construction site where cranes provide the backdrop to even the most luxurious hotels and where prices seem to be rising almost as fast as the buildings.

He agrees that Dubai is unique in many ways, but the biggest risk facing it in the future is inflation, according to Damian Harrington, associate director of international commercial real estate firm CBRE.

"It has built up an image of itself as a driving, ambitious centre, where everything is bigger and better than before and providing it is managed successfully, there's no reason why Dubai shouldn't continue this way," he says.

Mr Harrington welcomes a move by authorities to call for a cap on rent rises of 15% a year, after some residents of Dubai have seen their rents rise by up to 50% in the last year alone.

In November, the National Bank of Dubai said it expected inflation to reach a record 15% to 20% this year.

Mr Harrington says this has hurt business morale.

Sustainable growth

But Mr Harrington nevertheless agrees with fellow real estate expert Mr Scudder that Dubai's future is bright.

Both men say it will be several years before supply meets demand, which means the cranes will continue to shape the skyline of this booming city.

And they believe that as long as entrepreneurs and authorities continue to manage the growth of the city properly, Dubai will boom, despite the grumblings of some of its residents.

To this end, Mr Scudder disputes the notion that Dubai has failed to plan for its future.

"People aren't really seeing the benefits that they are going to reap very soon," he says, adding that roads are being widened to cater for increased traffic, while the mass of cranes that pepper the horizon will disappear soon as construction moves away from the centre.

He does not believe that the current building boom is unsustainable.

"Dubai has been expanding continuously for 30 years. There has never been a crash here."

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