Sunday, October 11, 2009

Life in Dubai after the meltdown

Tahira Yaqoob

Sheikh Zayed Road near Mall of the Emirates in Dubai is jam packed with traffic last month, defying expectations the city would become a ghost town. Jeff Topping / The National

Jane Coutts’s monthly ritual has been the same for the past two years: to sit on the terrace of the Lime Tree Cafe in Dubai with a close friend and watch the world go by over coffee and cake. There is one key difference now: her pal has fallen victim to the recession and left the UAE, leaving her to sit and contemplate her future in the country alone.

But while her circle of friends might have changed, the 57-year-old housewife from Australia remains pragmatic about the extent to which the UAE has been affected by the recession.

Expatriates held their collective breath as they waited for the predicted mass exodus over the summer months. With continuing uncertainty in the jobs market and many parents waiting for the end of the school year before packing up their lives in the sun, it seemed that everyone was waiting for the axe to fall.

The landscape has undeniably changed. Some did lose their jobs and return home, wondering what had happened to the Dubai dream.

Those families left behind have tightened their belts, cut back on extravagant or unnecessary spending and been more cautious about investing.

But what they haven’t all done, contrary to the predictions of the fearmongers, who forecast a huge migration, is leave.

Like many of those who have refused to give in to the uncertainty of a life thousands of miles from their homelands in the face of the economic crisis, Mrs Coutts has stuck resolutely to her guns and weathered the storm.

“There have certainly been people I know who left over the summer but an exodus is normal during those months,” she said.

“It is always quieter over summer, but the question was whether anyone would come back. Everyone was predicting schools would be half-empty but that has not been the case and traffic is back to normal.

“People have left but there are new people coming in. The recession has definitely had an impact on life here – rents have gone down and people are less extravagant.”

Mrs Coutts, whose husband is a property consultant, said the family had made some changes to their lifestyle.

“Last year we went on holiday for a month, but we agreed as a family that we could not afford to do that this year. We are more cautious about spending money because we are not sure about the future. But we are still here and quietly confident the UAE will survive.”

According to Donald Trump Jr, speaking at a notably subdued Cityscape in Dubai this week, the city had been unfairly painted by critics worldwide as a “dust bowl with no lights turned on”.

So what of the bleak images of deserted roads, empty schools and droves of unemployed expats dumping their cars at the airport, leaving trails of debts in their wake?

It simply did not happen, according to Simon Williams, the chief economist at HSBC bank in the Middle East.

“An awful lot of people with very little information were suggesting very strongly that there was going to be a mass exodus from the UAE, and Dubai in particular, when the school year ended. That did not materialise,” he said.

“The big downturn in employment came at the end of last year and the first four months of this year. The data is not there yet but we can all see what is around us.

“My very strong conviction is that the storm is largely over.”

In his new research paper called After the Storm, he notes: “Our view is that the conditions for recovery are now in place and a somewhat overdue pick-up in activity is about to begin… all regional economies are likely to prosper but our expectation is that it is Saudi Arabia, Qatar and Abu Dhabi that will lead the way.”

He said the Gulf region was taking longer to recover than other emerging markets, such as China and India, because of a slow response from governments, excesses during the previous boom and an ongoing credit squeeze.

Within the Gulf, Dubai’s economy was the hardest-hit by the downturn as it had few natural resources and would be slower to recover than Abu Dhabi because “employment is likely to have contracted significantly during the course of the year, with the impact of job losses on domestic demand compounded by the forced departure from the country of many expatriates who lost their positions”.

There is no doubt that the summer did see an increase in the number of people leaving UAE shores for good.

But Euro Movers, a Dubai-based international removals company, said the spurt of expatriates returning home in July had dropped by 20 per cent by September.

“There were still more people leaving in September than in the same period last year – nearly 50 per cent more in total,” said Khurram Abdulla, the company’s director of marketing.

“Typically, the number of people leaving drops in September and by October it is quiet again. This October is busier than normal.”

Significantly though, there have been new arrivals to replace those departing. “This month we have quite a few people moving into the country,” he said. However, compared with October last year, it was about half the number, and there were still twice as many people leaving as coming in.

“It is hard to say whether the recession is over. It looks like the number of people leaving is starting to drop off while the number coming in is increasing, so that is a good sign.”

Those leaving included investors or people with long-term business interests in the UAE, who had decided to call it quits. Tellingly, they are being replaced not by executives in managerial positions but staff on middle incomes, according to Mr Abdulla, who has noticed the size of shipments changing.

Where once, new arrivals would turn up with whole containers crammed full of furniture costing at least Dh11,000 (US$3,000) to ship, now they tended to come with baggage costing less than Dh3,700 to transport.

Mr Abdulla said: “About 80 per cent of our business was whole containers last year. Now it is less than half.”

All signs that even those prepared to up sticks and go to the considerable expense of relocating are still watching the purse strings.

“We have had to be more flexible with prices,” said Mr Abdulla. “Last summer there was very little haggling. If we had availability and a decent quote, the job was ours. Now it is a question of whether the price is right. Some people come in asking for as much as 50 per cent off.”

Chirantan Joshi, a sales manager at E-Movers, said the cull in jobs appeared to be over, if bookings for international removals were an indicator: “July was our busiest period. We had a lot of bookings for exports but it has been much quieter since August.

“From January until August, there was an exodus of people who had lost their jobs. That seems to be over now and the ones who are moving are simply transferring to other countries.”

Shipment sizes had shrunk as those moving tried to offload their goods to save money, he said. And the number of people leaving was now roughly matched by those moving to the UAE.

Jithosh Sudhakar, the head of operations at Dasa International Movers, said outgoing bookings for September were double the same period last year.

But he added that they had dropped off by 30 per cent this month, adding: “It has slowed down to healthy levels and people are starting to move here to replace them.”

Jane Drury, the founder and editor of the popular website in the UAE, sees faint hopes of a recovery in the new members popping up at the group’s daily coffee mornings.

“All our indications are that we are getting the highest hits on the website ever,” she said.

The number of new users on the website was 25,000 in October last year, when the recession was just beginning to bite. Over the summer it had crept up steadily, and last month the figure rocketed to more than 46,000 while 8.6 million people surfed the site, up from 5.8 million in June.

“At every coffee morning in August, we had up to 10 new faces and the forum is always very busy,” Ms Drury said. “We always have an increase at this time of year but the sudden leap has surprised even us.

“We all know someone who has lost their job but just as many people have found another one. There was a period of great uncertainty coming up to the summer and we were holding our breath, not really knowing which way it would go.

“There was a feeling of relief when we came back from holidays in September and it did not look any different from last year. Property prices are starting to creep up again. Now it is safe to think: ‘We’ve got over that one’.

“It is still a good life here and people still want to come for all the reasons they did a year ago.”

If community groups are a measure of families’ commitment to staying in the UAE, so too are schools. Clive Pierrepont, the director of communications at Taaleem, which runs eight schools in Dubai and Abu Dhabi, has seen a 12 per cent increase in the number of pupils starting the school term in Dubai.

“There has been a lot of movement within schools where parents have been trading up as well as new pupils coming in,” he said. “All the best schools have reported a healthy intake, which is a good indicator the worst may be over.”

Blair Hagkull, managing director of Jones Lang LaSalle, a Dubai-based property consultancy firm, said the UAE’s already transient population made it difficult to gauge how many were leaving as a result of the downturn. “I think the concern about an exodus that may have existed before the summer did not materialise,” he said.

“Compared with other places in the world, it has fared better. It largely depends on where you are from and which industry you are in. If the job and economic prospects are better in your home country than here, then it is logical to make your way home.

“Ironically the Gulf is less expensive to expats than it was 12 months ago. There is a sense that Dubai in particular has become more competitive as office and home rents have gone down.

“Most investors view it as continuing to be the commercial hub of the Gulf. We see an evolution from a development-led market to one increasingly focused on investment.

“There is a focus on regulation and legislation. That speaks well for the future as a more stable environment is good for everyone.”