Media piling on Dubai
The gulf city state's property prices went up as fast and as high as the towering buildings. But reality has suddenly intruded.Wall Street Journal:
One investor said it was as if someone had thrown a switch, as the global credit crunch slammed a city that was, in effect, the world's biggest construction site.
It took just 20 years for Dubai to go from a desert outpost with a handful of office towers to a world metropolis, where one fifth of the world's cranes operate, and property became a very hot commodity, with some people playing real estate the way others play poker.
Take the world's tallest building, the Burj Dubai, which remains under construction. In the last month prices there dropped at least 50 percent.
House prices on the man-made Palm - the iconic frond-shaped island colony - down 40 percent.
A seven bedroom villa? $10 million last year, under $6 million now.
Banks aren't lending. Projects are shelved. And the normally secretive government has had to acknowledge it has one of the highest levels of per-capita debt in the world -- and not enough oil to pay for it.
"The worst is still yet to come in the sense of people losing properties" Khadri says. "That will happen."
Dubai may yet weather the storm. It remains the most business-friendly enclave in the Gulf for foreigners. Over the past month, Dubai-controlled entities have repaid more than $1 billion of debt. And, in extremis, Abu Dhabi would probably support Dubai. Its ruling al Nahyan dynasty is tied by blood to Dubai's al Maktoum family.
Bankers say any such move could come in the form of Abu Dhabi taking stakes in Dubai's largest companies such as Emirates Airline or a direct financial bailout.
But any rescue would come at a price. It could mean reining in Dubai's Westernized style and economic openness. A new era already is beckoning. The downturn has coincided with a crackdown on corporate crime, with dozens of Dubai executives arrested without charge.
Day-to-day running of the emirate is returning to the sheik's Diwan, or royal court. Previously, Sheik Mohammed had handed over responsibilities to lieutenants outside his family and tribal inner-circle. Any signs of the emirate becoming a less-transparent place to do business may only make it harder to rebuild the Dubai dream.