Dubai is at last allowing foreigners to buy freehold property, thereby creating a Western-style housing market in a Middle Eastern culture, and it is taming a hostile desert environment.
But beyond the civil engineering and bravura architecture, the jury is out on whether this 25-mile coastal strip of the United Arab Emirates has succeeded in its aim to become a second-home destination for globetrotters.
On paper it seems immensely attractive. It levies no major VAT, property, wealth, income, inheritance or corporation taxes. Conscious of having just 8.5 per cent of the UAE's oil reserves, it is building leisure facilities and new homes in vast numbers - partly to meet the royal family's aim for Dubai's population to rise from 1.45 millon to 2.2 million by 2010.
It now has more than 30,000 hotel rooms, 35 international shopping malls and in excess of five million visitors a year. Its airport handles more than 100 airlines on 145 routes and its capacity is being tripled to 60 million passengers per year.
Moreover, some 2,600 companies have bases in a tax-free zone near downtown Dubai, and Internet City - a technology suburb - is home to regional offices for Siemens, Oracle, Dell, Microsoft and IBM.
But in practice some home-buyers find it a challenging place. First, there is little market information. Dubai has been selling property to international buyers for only four years so as yet there is no impartial Halifax-style price index. The best advice comes from respected British agents.
"The rentals market is particularly strong. But there's a lot of construction under way and it will take some years for it to be clear whether supply and demand are roughly in line in terms of the sales market," says Alex Upsom of Cluttons, a British agency now selling in Dubai.
Moreover, Dubai has a reputation for speculation. Until the law changed in 2005, it was easy for sharp investors to buy and sell apartments long before they were ever constructed, leading to artificially inflated prices with no real indication of how many genuine users there would be for completed homes.
"Now the market is maturing. Real users are here. Many who live and work in Dubai have bought new properties that are still being built, so they've had to rent. The lettings market has boomed in the past 18 months," says Jeremy Rollason of Savills.
There has also, historically, been a lack of transparency in the purchasing and ownership process. Until this month, foreign buyers were only entitled to purchase leasehold. Even now, there remains uncertainty over the thousands of leasehold homes bought in recent years by Britons and other foreigners: will they automatically become freehold now that the legislation has changed?
One direct benefit at least is that the new freehold status may encourage mortgage lenders to look favourably on buyers in Dubai in the future - until now, they have not.
Finally, there are a vast number of homes coming on to the market. If you want to get a feel for the sheer volume of work going on, look at the satellite images of Dubai on the Google Earth website, where scores of cranes are visible.
More than 12,000 homes for foreign buyers have been built since 2003, plus thousands of cheaper properties for locals. This means that anyone wishing to re-sell a home has competition from new properties.
The consequence of so many homes coming on sale year-on-year may be price falls if Standard Chartered bank's prediction is correct. "Development of the Palms, Dubai Marina, Business Bay and Arabian Ranches, to name just a few [schemes], is going to boost supply in the coming five years in dramatic fashion. To us, this suggests that a decline in property prices is just a matter of time," a spokesperson for the bank says.
But the view in Dubai is that the extraordinarily influential royal family may prevent this happening. Some experts say that the three top developers - all closely linked to the royals - will cut back on building to keep prices up.
Either way, the next few years are likely to be decisive for Dubai's unique market. By about 2010 it will be clear whether the city-state is a genuine holiday home location or just an exciting idea that, like the land around its edges, turns to sand.
TO BUY OR NOT TO BUY?
The Investor: "We're looking at Sports City [a Dubai suburb]. The project is expected to have a minimum return of 15 per cent, which is good by any standards," according to A J Valentine, a US property investor. "Dubai's development investing is a no-brainer. It's performance is similar to that of London, Paris and Singapore, while still having an affordable price range."
The Holiday Home Owner: "I wanted year-round warmth, security and a high standard of living. My wife and I will use our apartment during the winter. The on-site facilities have all we need in terms of entertainment. The purchase is straightforward and a seven-year plan made it affordable," says David Tulett of London, who has bought a flat near Dubai Marina.
The Sceptic: "I wouldn't put a penny of my money there," says Stuart Law, of investment consultancy Assetz, who says it was difficult not to be wary of a country that took so long to allow freehold ownership. "There's also concern about the environmental impact of so much development. It's a city based on consumerism. I'm not sure that guarantees its role as a long-term holiday-home location. I wouldn't buy there."Reuse content