Between the desert and the deep blue sea

Dubai has swanky new resorts, little crime and no tax. So what's the catch? Cheryl Markosky reports on one of the fastest-growing cities on the globe
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The Independent Online

If you thought Baghdad, Kabul or even Beirut were the biggest construction sites in the Middle East, you would be wrong. Over the next five years, the city state of Dubai on the Persian Gulf will have more cranes than camels to the square mile and become the second fastest-growing metropolis on the globe after Shanghai. Hotels, villas, golf courses, water parks and apartment blocks are rising out of the desert, and even out of the sea, at an astonishing rate. And the marketing people want the British to know that Dubai is the next big thing in the rush to find a place in the sun.

If you thought Baghdad, Kabul or even Beirut were the biggest construction sites in the Middle East, you would be wrong. Over the next five years, the city state of Dubai on the Persian Gulf will have more cranes than camels to the square mile and become the second fastest-growing metropolis on the globe after Shanghai. Hotels, villas, golf courses, water parks and apartment blocks are rising out of the desert, and even out of the sea, at an astonishing rate. And the marketing people want the British to know that Dubai is the next big thing in the rush to find a place in the sun.

Due to recent changes in local property laws, Dubai is the only place in the Gulf where property can be purchased freehold. You can rent in Bahrain and Oman, which is fine for holidays, but less attractive to investors wanting to own a second home.

Once famous for its pearls, Dubai found oil in the 1960s and now has discovered tourism. Charles Weston-Baker of FPDSavills, representing two big developers IFA and Nakheel, comments: "Dubai has fabulous weather, cheap property, low taxes and is one of the fastest-growing tourist destinations in the world."

By 2008, there will be 200 new skyscrapers and 250,000 new homes in Dubai, including an artificially created resort with two surreal palm-shaped islands built offshore and a further 200 islands arranged as a map of the world. There is even talk of an underwater hotel. To make the sums add up, Dubai will need to encourage upwards of half a million foreign investors.

So who is buying? Early investors in Dubai came from the region itself - Kuwait, Saudi Arabia, India and Pakistan. The sales drive is now aimed at the British. Weston-Baker says: "Security, even during two recent local wars, is good, crime is low, there are few restrictions and the people are well-mannered. For British investors, it represents value for money."

Dubai is controlled politically and financially by the Maktoum family, best known in the UK for their horse-racing interests, with no sign of democracy on the shimmering horizon. According to Peter Riddoch, chief executive of Damac, one of Dubai's biggest developers, "Dubai is really Dubai Inc; the whole place is run as a business. It is seen as a safe haven in an otherwise troubled region." The same, of course, used to be said of Kuwait.

Most property is being bought off-plan. Damac's two-bedroom apartments range from £138,871 in the Palm Springs Jebel Ali (buy now and you get an Audi 4 free with every apartment), to £187,000 in the Marina Terrace. Many of the villas are "self-build" - you buy the plot and choose from a dozen designs. The Arabian Ranches golf course development by Emaar offers three-bed houses from £200,000 and five-bed mansions at half a million. And with 7,000 villas planned for the site, which also has an equestrian centre, you won't be lonely.

The twin pearls, as it were, are the two Palm developments, by Nakheel and FPDSavills, each with 2,400 shoreline apartments and villas, 50 luxury hotels, theme parks, cinemas and sports complexes. If you want to be on one of the fronds, it will cost £350,000 to £500,000 for a three-bed house with sea views; a five- to six-bed Signature Villa with ocean frontage and pool will set you back £800,000 to £1.4 million. The prices are relatively inexpensive in comparison to the Caribbean, Spain or Portugal, but it is far too early to accurately project potential rental income.

So what are the drawbacks? Well, take a look at the map. Dubai is 400 miles south of Iraq, 200 miles from Iran and as part of the United Arab Emirates, almost surrounded by Saudi Arabia. The region is as politically unstable as south-east Asia was in the 1960s. All laws, financial and political control are vested in just one family. As long as its benign dictatorship holds sway, Dubai Inc looks set to prosper. But the investment climate could alter radically.

Dubai is essentially an artificial resort with little traditional culture. If shopping, eating, golf and water sports are high priorities, you will be happy. But with the "old town" only a ripe 25 years of age, think Vegas without the gambling and dancing girls. Dubai may be the most westernised city in the Gulf, with alcohol readily available, but the dominant culture is Arabic. "You have to be aware of Islamic tradition and be sensible, but the local leadership is very enlightened," claims Riddoch.

Dubai is said to be looking to attract "class" buyers. Half the England football team, who trained there before the last World Cup, have bought property. If the developers could only persuade Jonny Wilkinson to practice his drop kicks on the beach, they would be able to attract the respectable, family-orientated, gin 'n' tonic brigade they are really after.

www.damacproperties.com, 0097 14390 8804

www.emaar.com, 0097 14316 4608

www.thepalm.ae, 0097 14390 8804

FPDSavills International: 020-7824 903, www.fpdsavillspropertyoverseas.co.uk

FACT BOX

Currency The UAE Dirham is fixed to the dollar at 3.67, so property prices fluctuate with the pound-dollar rate.

Mortgages From major banks including HSBC, on a 10- to 25-year basis. Usually a 10% minimum deposit, with interest rates linked to the UK.

Tax There are no taxes of any kind when buying new property in Dubai. There is no local income tax, CGT or Inheritance Tax.

Visas and residency Permanent residence visas are issued to new owners and immediate family and can be renewed every three years for about £1,000.

Climate October to June is warm to hot, with little rain. Mid-summer is 45C-plus.

Language Arabic, but English is the common language for service and finance.

Flights Seven hours London to Dubai costs £400 with BA or Emirates. Also flights from Manchester or Birmingham.

Laws Property contracts are modelled on UK law, but the criminal system is based on Sharia law, so stepping out of line is not advisable.

Population One million and growing, split 30% Dubai nationals, 30% Europeans and 40% from the Subcontinent.

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