Buoyed by a swift economic rebound post-COVID, Dubai is racing to attract people and capital to drive long-term growth, betting it can avoid past debt crises that dented its global ambitions.

The approach pursued by the glitzy Gulf city-state is a reboot of a flamboyant economic model that for decades focused on property investment, tourism and inflows of foreign capital.

Property is booming once more — helped by Russian demand amid war in Ukraine and laxer residency rules — and analysts this time see more guardrails in place against any repeat of the problems that subdued Dubai after the 2008 global credit crunch.

Home to the world’s tallest tower and man-made islands, Dubai is chasing lofty new goals: A 10-year economic plan known as D33 aims to double the economy’s size and make Dubai one of the top four global financial centres in a decade.

It also wants to increase the length of its public beaches to 105 km from 21 km by 2040 and revive the dusty Palm Jebel Ali island abandoned in the wake of the 2008 financial crisis.

Tourist numbers in 2023 are almost back to levels of 2019, and last year Dubai was the world’s fourth busiest ultra-prime property market, with 219 home sales over $10 million, according to Knight Frank research.

At the same time, the property price surge and demand for the ultra-high-end segment is stirring memories of old excesses.

In 2008, the global financial crisis hit Dubai hard, leading to a flight of capital and people, a crash in property prices and highly leveraged flagship companies known as government-related entities (GREs) struggling to repay debts.

Abu Dhabi, the UAE’s oil-rich capital, eventually stepped in with a $20 billion lifeline, widely expected to be rolled over for a third time.

Nasser Al Shaikh, head of Dubai’s finance department until 2009, told Reuters there is a risk Dubai will become too expensive to live in, and new developments need to ensure ample supply to meet demand for mid-income property as the population grows.

“If private developers cannot provide that, then the government and GREs could play a bigger role to do that and keep prices reasonable,” Shaikh said, referring to the leading companies that have spearheaded Dubai’s breakneck growth.

Dubai’s population grew to over 3.55 million in 2022, official statistics show, up 2.1% from 2021, and 4% since 2020; S&P estimates it to surpass 4 million by 2026.

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“There is always the risk of a major new round of borrowing (by GRE developers) on unrealistic expectations for real estate sales; however, I am hopeful that learning from previous cycles will mitigate this risk,” said Justin Alexander, director at Khalij Economics and Gulf analyst at GlobalSource Partners.

The Dubai Media Office did not immediately respond to a request for comment on how its strategy is working towards ensuring growth is sustainable and not speculative.

Dubai set up a Debt Management Office in 2022, has repaid or restructured some outstanding debt, and announced plans to list government stakes in 10 companies to raise capital and deepen financial markets. It listed four of those last year.

Shaikh said current finance officials have learned from the experiences of the last 15 years.

“Dubai has a strategy today, and development of capital markets is an important component of Dubai’s overall financial proposition, not only to generate liquidity and to pay off debt but also to deepen capital markets within the financial sector.”

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The United Arab Emirates’ commercial centre, Dubai has shovelled resources into social and business reforms and sectors like digital technology. Oil revenue accounts for less than 2% of GDP, unlike the deep-pocketed capital Abu Dhabi.

Average property prices rose 12.8% in Q1, with villa prices up almost 15%, according to property research firm CBRE. Villa sales have surpassed 2014 highs. Russian buyers were third in Betterhomes’ May top 10 buyers, behind India and the UK.

“Dubai has really set itself as a global safe haven,” said Richard Waind, group managing director at Betterhomes in Dubai, adding it was safe for families and stable politically and financially.

“It’s no longer a speculative market. It’s a market built on genuine investment. I think that’s a very big difference to what we saw in 2008-2009 and perhaps the last peak around 2014.”

The rebound has also bolstered balance sheets of top Dubai Inc companies, including GREs such as Emirates airline, and majority government-owned but listed Emirates NBD (ENBD.DU) and Emaar Properties.

S&P has estimated Dubai’s gross general government debt will fall to 51% of GDP, or about $66 billion by the end of 2023, from 78% of GDP in 2020, although broader public sector debt will stay elevated at about 100% of GDP due to high non-financial GRE liabilities.

Dubai’s five-year credit default swaps, the cost of insuring against a default, reached a historic low of 66 basis points on March 8 this year, well below 316, the highest level it reached during the depths of the COVID-19 pandemic in 2020.

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Last year, Dubai attracted an estimated $12.8 billion in foreign direct investment capital according to the 2022 Financial Times ‘fDi Markets’ report published last month; FDI into Saudi Arabia was about 30 billion riyals ($8 billion).

Despite growing competition from Gulf neighbours, Dubai’s infrastructure, schools and hospitals remain in high demand.

Several people Reuters spoke to highlighted concerns about a lack of data and transparency, particularly among GREs, making it more difficult to properly assess Dubai’s fundamentals.

The UAE was placed on the “grey list” of global financial crime watchdog the Financial Action Task Force (FATF) in 2022, increasing the risk of reduced capital inflows, a decrease in M&A activity and a potential lack of investor confidence.

But some prominent investors are sanguine.

“Dubai has been one of the most resilient destinations,” said Philippe Zuber, CEO of Kerzner International which operates the luxury Atlantis and One&Only resorts, adding Dubai had kept borders open and businesses strong during COVID.

Kerzner, part-owned by Dubai’s sovereign wealth fund, opened the “ultra luxury” Atlantis the Royal in 2023, its second Atlantis resort on Palm Jumeirah island. The Royal Mansion Penthouse, where Beyonce once stayed, costs $100,000 a night.