Dubai bubble bursts

Dubai, Glitters in the Arabian Night
(source: Original source unknown. Downloaded from CIV1120)


Looks like the real estate bubble in Dubai has burst. On top of some real estate builders running into problems, it seems that consumer defaults are rising:

For the UAE, a country more accustomed to the upward side of the economic curve, this is unchartered territory. The country has had few dealings with the bankruptcies and bad debts that follow financial storms, as demonstrated by the UAE's opaque insolvency legislation. Worse, banks are unsure how to deal with loans racked up by expatriates during boom-time, which are now looking increasingly shaky.

Across the country job losses are mounting as the real estate market flounders. In December, Dubai state-backed developer Nakheel made 500 of its staff redundant. Dubai-based Damac Properties has cut 200 jobs while Al Shafar General Contracting has laid off 1,000 workers.

Outside the property sector redundancies have also been felt with Dubai's Shuaa Capital cutting 21 jobs and Dubai World shedding 100 of its staff.

Many expatriates have since been left high and dry with significant debts.

In recent years the UAE's rapid inflation has outpaced wage growth, while a housing market that typically demands tenants pay a year's rent in advance has forced many residents to take out personal loans.


At one point, Dubai had 30,000+ construction cranes--and this, for a single city.

(source: Image posted by Iraqeya at AliIraqi)


This might be the end of the boom in Dubai for the time being. However, I don't think all is lost and think that Dubai has permanently taken a place in the world. Although many billions will be lost on the bust, Dubai will end up with physical infrastructure that can be used for decades. The following image shows how Dubai has gone from an outpost in the desert to a vibrant city.

(source: Image posted by Iraqeya at AliIraqi)


If political problems do not arise, and if Dubai keeps liberalizing and opening up, I suspect it will become like Singapore. Not my idea of a nice place to live but many wealthy people, as well as many conservatives, will love the place... All this is assuming it doesn't implode as the real estate projects fall apart in the near future.

An Unfinished Dream...as all Real Estate Projects Are

(source: Image posted by Iraqeya at AliIraqi)

Comments

  1. AnonymousFebruary 26, 2009 at 12:23 AM

    I don't think real estate in dubai is a bubble.The present crisis is the temporary factor.

    ReplyDelete

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