Success is all relative in a global economy, buy Dubai!

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It seems that we have a competitive round of stimulus packages and currency devaluations across the world, albeit with a degree of coordination at times. The basic intent of policy makers is clear: inflate to amortize debt left over from the biggest ever global borrowing boom.

In that the inflation now has to be equal to the size of the problem the numbers involved are huge. Take Citi’s $306 billion bailout yesterday, and that for just one bank.

Success among nations will be judged by the ability to minimize the size of the contraction of the real economy by comparison with other countries. There are no winners this time. Losing the least money is as good as it gets.

Oil prices

On that rating the Gulf economies should score pretty well, especially as the inflationary efforts of governments around the world is going to have a nasty unexpected side-effect: higher oil prices. This will keep feeding money into the Gulf oil states and prevent their formerly booming economies from imploding. Modest growth levels could, in fact be restored pretty quickly.

It will not, however, prevent a ‘necessary correction’ in real estate – as Dubai advisory council chairman Mohamed Alabbar said yesterday. But pain is all relative in the global economy today – and the pain suffered in the Gulf will be less than elsewhere, and the recovery prospects are much better.

For while bankers at the Dubai International Financial Center’s DIFC Week conference are reasonably confident of a quick recovery in the Gulf States, they are far more gloomy about the outlook elsewhere around the world. An electronic poll of delegates established 18 months as the average time expected before the world’s markets hit the bottom.

Global depression

Recovery could take up to five years, some of the participants said. However, that will not prevent a shake-out in the Dubai real estate sector, particularly for off-plan property which may now never be delivered to its ‘owners’.

On the other hand, the promised ‘rationalization’ of the sector should secure the long term future by equating supply and demand. Indeed, it could actually enhance the long term outlook for house price rises by restricting supply growth.

Fortune favors the brave and buying either property or property stocks at this very fearful and depressed stage of the local business cycle is highly likely to deliver long term rewards. With the Dubai Financial Market down 38 per cent this month there has never been a better time to buy.