Once Booming Dubai Goes Bust

CBS Evening News: Following Wave Of Speculation, Real Estate Collapses In Middle East's Capital Of The Ultra-Rich

(CBS)  Over the years, booming oil prices helped turn Dubai into a land of opportunity and playground for the ultra rich.

But that was then and this is now. And as CBS News correspondent Sheila MacVicar reports, even Dubai is feeling the pinch of the worldwide economic crisis.

The gulf city state's property prices went up as fast and as high as the towering buildings. But reality has suddenly intruded.

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.

"People were buying and flipping properties on a launch basis," says Manesh Khadri of Century 21 Real Estate. "You launch a property and you flip it within the same day."

Before an apartment was even built you could away with tens, or even hundreds of thousands of dollars.

Developers promised: Pay $140,000 for an unbuilt apartment, and within six months, reap a $46,000 profit. So as fast as the city expanded, investors snapped up the real estate, taking on big debt.

American Internet entrepreneur Mahmood Panjwani understands the risk of building a business

But, "I really did not know what risk was until I came here," Panjwani says. "I mean Dubai is like Silicon Valley on steroids from a risk perspective."

Buying real estate with little money down and lots of debt is risky indeed. Panjwani saw trouble coming and got his cash out of the market.

"There's a lot of fear," he said. "How low can it go down? How long will it stay down?"

Left: The Burj Dubai tower rises in Sheik Zayed highway in Dubai, United Arab Emirates, in this September, 2007 file photo. The world's tallest building is still under construction, but prices there tumbled 50 percent as Dubai's once booming economy and real estate market have gone bust.

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."

Of course, Dubai will come back eventually, many say, perhaps without the speculators and the insane price increases. So while the fizz might be gone, they insist, the water still sparkles.

[toolmangler-2009]

Too bad I won''t be here to see it, but in 50 years the desert will have reclaimed Dubai City, the foreigners will be gone, and the Arabs will again be living in tents on their lovely beaches.
Posted by jcoles0069 at 12:15 AM : Jan 04, 2009




as it was, so shall it be, Well said and most likely true. (When I first read of a "paradise" in the desert the story reminded me of a place in the past that was named "Babel"). That is another place where man said "I will" and GOD said "No you won''t because you didn''t ask me first".

[presjfk]

The problem with Dubai is simple, who wants to live there? Ahhh, nobody.

[nikosk11]

Booooo Hooooo. Heartbreaking isn''t it?
LOL, LOL.

[runningralph]

Dubai seems to be a good example of "nouveau riche". Instead of fancy buildings they should build things to conserve and sustain. Liberal policies will always lead to collapse.

[mlm75]

Dan_8951 %u2013 Read a book or two. Pick up a newspaper other than USA Today. Stop watching Fox News. Your outright racism, bigotry and ignorance are shocking. It is sad that this world must even hear a whisper from your dark, distorted and sad corner.

[jcoles0069]

The UAE is the most schizophrenic place I''ve ever been to. Part modern, part 6th-Century; part forward looking and multicultural, part primitive and part xenophobic. The list of diametrical oppositions could go on and on.

I feel badly for the ordinary folks who live and work there, but I have little sympathy for the ''high rollers,'' -- particularly those in the self-described Arab elite classes -- who are now feeling the pain of crashed oil prices and the general worldwide economic downturn.

Too bad I won''t be here to see it, but in 50 years the desert will have reclaimed Dubai City, the foreigners will be gone, and the Arabs will again be living in tents on their lovely beaches.

[jcoles0069]

The UAE is the most schizophrenic place I''ve ever been to. Part modern, part 6th-Century; part forward looking and multicultural, part primitive and part xenophobic. The list of diametrical oppositions could go on and on.

I feel badly for the ordinary folks who live and work there, but I have little sympathy for the ''high rollers,'' -- particularly those in the self-described Arab elite classes -- who are now feeling the pain of crashed oil prices and the general worldwide economic downturn.

Too bad I won''t be here to see it, but in 50 years the desert will have reclaimed Dubai City, the foreigners will be gone, and the Arabs will again be living in tents on their lovely beaches.

[elramees]

Good reporting Shelia! Also, we remember that it was your News Medium that reported the abuse of these foreign nationals who worked long hours in deplorable conditions receiving little or no pay. While major developers, investors, and contractor were the profiteers...Let me remind all (including USA)"GOD hate unjust scales!!!!

[elramees]

Any ruling country that allows such sins to exit upon its "religious" territory, such as that which was engaged by the Bush administration and its neo-cons, I fear, will soon reap its reward of greed and tolerance. Watch out USA!! How dare you point the finger at Dubai?

[hsinco-2009]

What will Diick Cheney do?
Where will he go?
Poor Haliburton which moved it''s Headquarters to Dubai. They must be losing all the billions of $ they got from the no-bid contracts in Iraq.