Diversification by Urbanization: Tracing the Property‐Finance Nexus in Dubai and the Gulf

Abstract

This article explores the role of liberalized real estate markets in shaping financialsector development in the Arab Gulf region. Since 2001, record oil revenues and the inflow of repatriated wealth into the region have generated immense demand for new, productive destinations for surplus capital. Gulf Cooperation Council states have subsequently undergone rapid growth that is intimately tied to the regulatory transformation of urban real estate markets and the circulation of surplus capital from oil rents to the 'secondary circuit' of the built environment. With an emphasis on the city of Dubai, we employ the notion of diversification by urbanization to trace the re-regulation of real estate markets and highlight how these strategies have subsequently shaped Gulf financial markets. Through an examination of the impacts of real estate mega-project development on local banking credit, equities and Islamic financial markets, we reframe recent urbanization in the region as a process of financial re-engineering, and identify the emergence of capital groups whose accumulation activities are tightly connected to both the real estate and financial circuit.

The Variegated Financialization of Housing

“…Henri Lefebvre (), David Harvey () and others have theorized the connections between urbanization and capitalism, arguing that the built environment has become essential to both creating and storing surplus value, with ‘finance capital’ controlling this process. Building on this literature, Buckley and Hanieh () have recently argued that in some cases, such as Dubai, urbanization can be seen as a process of financial re‐engineering. Furthermore, it could be related to what Crouch () and Watson () respectively have dubbed ‘privatized Keynesianism’ and ‘house price Keynesianism’, i.e.…”

Transport Infrastructure and Logistics in the Making of Dubai Inc.

“…Dubai has undergone rapid transformation in terms of its urban landscape over the past two decades, leading to sustained academic interest in the scale and form of its urbanization process, with some labelling it an exceptional model (see Hvidt, ; Elsheshtawy, ). Others have moved beyond the exceptionalism narrative, situating Dubai within international neoliberal trends and critically tracing the connection between liberalization, urbanization and the emergence of domestic capital groups imbricated in the transition of the built environment (Kanna, ; ; Buckley and Hanieh, ; Hanieh, 2015). In his discussion of Jebel Ali Port specifically, Ramos () has insightfully emphasized the importance of examining the link between trade infrastructure and urbanization.…”

“…Recent literature on Dubai has focused on its transition to a 'global city', its neoliberal model of urban development and its economic diversification plans (Davis, 2006b;Davidson, 2008;Elsheshtawy, 2008;Kanna, 2011;Buckley and Hanieh, 2014). An important and rich historical literature has also traced the impact of British colonial policies on the emirate's development trajectory and analysed relations between its merchant class and the ruling Al Maktoum family (ʻAbd Allāh, 1978;Zahlan, 1978;Heard-Bey, 1982;Peck, 1986;Naqīb, 1990;Al-Sayegh, 1998).…”

Replacing the services sector and three-sector theory: urbanization and control as economic sectors

“…A final set of possibilities emerge from the larger framework. The establishment of the control sector can potentially shed light onto the size and scope of the financialization of housing and infrastructure (Fernandez & Aalbers, 2016;Fields 2017), and to the related exploration of Harvey's capital-switching hypothesis, which has received renewed attention as of late (Gotham 2006;Christophers 2011;Buckley and Hanieh, 2014).. The tradition under three-sector theory of merging many industries into the FIRE sector and studying them as Advanced Producer Services may have yielded important insights as to the growth of global cities, but a different approach is needed to understand the control of real estate by finance.…”