Dubai is a city that traffics in hope and optimism, but above all, it serves as a model for the concept of rationality. Despite the push-and-pull forces trying to push politics in opposite directions, the city’s moral compass has been one of rationality, the highest calling one can answer.
This way of thinking worships facts, and when the realm of facts cannot be reconciled, there is only one variable that overcomes it; patience.
Rationalism is one of the words that has developed a slippery coating. In its purest sense, constructing rationality is about how we acquire knowledge, through deductive reasoning and the power of the mind.
Of course, a priori knowledge of the facts is a prerequisite for the formation and exploitation of this type of knowledge base. It is in this context that when we look at the real estate research reports for 2021, one variable jumps out at us – No one seems to agree on the number of units that were delivered for the year.
Estimates abound from 17,000 households to 36,000; what is amazing in this regard is that the Dubai land department has already released this data into the public domain. It is puzzling to see the narrative of oversupply still engulfing the landscape, when rising prices and rents have clearly put an end to the idea that such an oversupply would exist.
Combine this with the Dubai Master Plan 2040 which calls for a near doubling of the population from current levels, and the picture that emerges is of a need to urbanize even faster. Data-driven intermediaries have been equally perplexed by this wide disparity in numbers. In a sense, their job has been made more difficult by the erroneous numbers that continue to emanate from the analyst community.
Follow the facts
The recent release of Ejari’s data for 2021 further bolsters the claim that industry watchers already knew; rents have risen for the most part across the board despite Covid headwinds, and these numbers run counter to the oversupply narrative.
There are an infinite number of potential interpretations and opinions on how the market may move. It is only natural and serves as the foundation of a market. What clouds judgment is when the realm of facts is eroded by numbers that are empirically flawed.
Macroeconomic supply statistics are a variable that the analyst community has been grossly wrong time and time again since 2008. The oversupply narrative that has taken over was irrevocably challenged last year by the facts on the ground, as prices and rents rose. in response to the upward shifting demand curve.
The empiricist movement in philosophy paved the way for rationality by observing facts on the ground and determining whether they were incongruous with observable events. In Dubai, policymakers have taken the same approach, as have long-term investors and the intermediaries who exploit them.
The blueprint for the city’s future, charted not just in the city plan but in the successes of its past and the resulting wealth creation for those who have been willing to wait, is simple. But for the most part remain incongruous with what most of the analyst community has been saying over the past few years.
Prices and business cycles move in a varying direction over time under a number of variables that act and put pressure on them. In the longer term, successful cities fail to do so with a veil of excess supply hanging over them. Nor do they succeed with chronic levels of undersupply.
Rather, the only axiomatic claim to extract is that for cities with the right ingredients, the creation of assets and wealth is the inevitable consequence of the long-term growth trajectory. In this context, comments that profess otherwise are part and parcel of the conversation society has with itself. Nowhere in this conversation can the facts be distorted for an extended period.
The good news is that this form of rationalism not only emerges triumphant in the end, but more importantly, can be learned. An increase in rationality is not something you choose or do not choose. The implication is clear: you have to work at it.
Becoming more rational is a long process that takes patience and discipline, and over time weeds out speculators and misinformation carriers. It is something that can have a variable result in the medium term. In the long run, there is almost nothing more important.