Richard Waryn has lived in Dubai for only two months but he already is certain that the glitz capital of the Mideast lives up to its go-go reputation. What he is not so sure about is whether to sink his money into the sleek apartment towers springing up everywhere.
With property prices up 40 percent this year - and critics warning that a slide is coming - other potential buyers are asking themselves the same question.
"There are just too many developments under construction that are coming online in the next two or three years," said Waryn, an American executive who moved to Dubai from London. "The supply and demand balance are going to be out of whack and the prices will come down."
A Morgan Stanley report predicted a 10 percent decline in prices by 2010 as the supply of new properties outstrips demand. But that view is disputed by other analysts and high-end developers, who say Dubai still is not building enough housing to accommodate a population that is growing by 7 percent a year. Of the emirate's population of 1.5 million, about 75 percent are expatriates like Waryn.
A key question facing the property market is whether the still-booming regional economy can withstand the economic turmoil gripping other parts of the globe. Those worries have sent Middle East stocks tumbling in the past two weeks to multiyear lows.
With oil prices falling, further concerns were raised late last month when the Central Bank of the United Arab Emirates made $13.6 billion available to the country's banks. "There appears to be a bit of a liquidity crunch going on with the central bank moving to put money in the market," said Sean Gardiner, head of regional research for Morgan Stanley. "It may make some of the smaller developers struggle to find financing."
Still, most analysts say Dubai is well positioned to ride out the global downturn. Investors expressed confidence that Middle East real estate markets would outperform others in the world over the next two years, according to a survey released Oct. 7 by the real estate agency Jones Lang LaSalle.
At Cityscape, Dubai's splashy annual property fair held last week, several plans for large-scale projects were announced, including a $39 billion tower that developers said will be the world's tallest. Dubai already is building a $20 billion tower, Burj Dubai, that has been expected to take the world's tallest title when it is finished next year.
Some analysts warn that a drop in real estate prices is inevitable if Dubai does not curb speculators who, seeking a quick return, buy and flip their interest in so-called "off-plan" units - projects that are still on the drawing board.
Developers sensitive to the criticism are taking steps to reassure investors and some even have stopped selling off-plan units. Others are targeting long-term buyers not only with promises of higher returns than can be obtained in Western capitals these days, but also with glossy promotions touting the lifestyle benefits of tax-free Dubai.
One project being heavily marketed is Culture Village, a 110,000-square-meter, or 1.2 million-square-foot, complex set to open in 2010 hugging the picturesque Dubai Creek. Along with the usual apartments and restaurants there also are schools planned for the arts as well as the 25,000-square-meter Museum of the Middle East, or Momena.
"Today we realize in Dubai that we should expose our past, our culture, our rituals, our dance. That's what was missing," said Yaqoob Al Zarooni, vice president of the government-owned Dubai Properties, which is building Culture Village. He was speaking at an event last month at the Ritz Hotel in Paris to introduce Babil, one of the complex's four midrise residences. The 51 studio to two-bedroom apartments, all of which have been sold, started at $414,100 and were aimed at European, American and Japanese buyers.
A 145-square-meter, two-bedroom apartment selling for $1.25 million at Babil would cost twice as much in prime areas of New York. In London, where housing prices are down 4.3 percent this year and expected to fall further, it still would cost six times as much.
"There is still no place else where buyers can continue to make these returns," said Shirley Humphrey of Harrods Estates, which is marketing the Babil project.
For now, despite concerns about the global economy, it appears the questions most Dubai residents are asking is when and where to buy.
Trends include developments pushing far into the desert and projects with themes like Dubai Properties' Mudon, a sprawling complex of five minicities, including a mock Marrakesh and Cairo.
Everyone, it seems, is in on the game. Waryn and a friend said they were stunned when, over dinner at the Dubai Marina, their waiter tried to sell them his option in a two-bedroom apartment in the Burj Dubai tower.
"It's like Las Vegas on steroids, without the gambling," said Waryn, 45, managing director for a private equity investment group.
In the end, Waryn and his wife, Liz, a lawyer, opted to rent a 550-square-meter duplex penthouse with private pool and terraces overlooking the sea. The $100,000 annual rent seemed a better deal than buying an equivalent property for about $4 million, although he said they still may buy an investment property.
So far, they are thrilled with life in sunny Dubai, where Jumeirah Beach is steps away and there are things to do with their 21-month-old daughter, Alexandra. "It's kind of the antithesis of where London and New York are right now," Waryn said. "The Gulf is a very attractive place while the rest of the world is doom and gloom."