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.

[stinginrich]

The most famous playground of the Neocon Nazi Elite, who must have both unrivaled Luxury and Decadence in addition to nonextradition for their Crimes against Humanity, will be just fine.
Why, right now, all the funds stolen over the last 8 years of these Criminals Rule is being deposited in Secret Dubai Accounts and Vaults, where it''ll be used in Part 2 of their plan of World Domination.
Just continue to go about your daily Peon/Serf activities. They''ll let you know when it''s time to report to the camps.

[toolmangler-2009]

I predicted the fall of Dubai, but I thought a Tsunami would be the cause of its fall. Mercy! all it took was greed. LOL.

[fairplayer1]

The laws broken by sheikh maktoum hasher (winner of world scam award 2008) to elevate himself from a poor sheikh to be recognised as a real sheikh:
1. Misrepresentation/ False promotional campaign (showing photos of construction of JBC1,2,3,4,5 for the sales of Ebony Ivory project) while there is no contractoron site, no building permit%u2026. this is a criminal offense under uae law. (But RERA & SHEIKH MOHAMMED HIS UNCLE R SLEEPING!!!)
2. dynasty zarooni who is a real estate broker has been collecting money into their own account this is 100% illegal%u2026 infact in some cases they have even sold properties with 100% down payment, imagine the poor buyers when they realise te photos shown in gulfnews were lies!!!
3. ofcourse no escrow/trust account%u2026 No construction%u2026
4. Threatening investors and staff of al fajer properties. Investors in JBC1 are forced to move to another building s that sheikh maktoum hasher the wanna be poor sheikh can make a few millions through his friends who will sell the property to new buyers.
5. There is no immunity for sheikh maktoum hasher or his father sheikh hasher maktoum, sheikh mohammed is just too busy counting the money he has lost so he is a bit distracted now. he pretends as if he is above the law, but in reality he is a coward who can only threaten drivers and junior staff in al fajer

[fairplayer1]

http://www.raisethehammer.org/index.asp?id=781

As a UAE national with PhD in law I have to admit that Sheikh Mohamed has failed to put in place a transparent judiciary and has concentrated more on self PR by anouncing unrealistic projects and reading clever lines which secures his own ego problem. His family members treat the society like animals%u2026 they steal from foreign businessmen, threaten them, and some times using the famous state security even arrests them to reach their commercial goals.
it s sad that sheikh mohammed%u2019 s brother in law sheikh hasher maktoum has stolen a multi billin dollar bussiness from a foreign investor just because he is related to sheikh mohammed. We have no human rights here, the judiciary is as corrupt as real estate, finance, immigration%u2026. dubai is crashing

[duffyn]

Nuke monuments of greed? How about some of these wall street *&holes? We have the one guy that took $50 billion with a ponzi scheme who is now out $10 million bail. How fair is that?

[telescopeman-2009]

Posted by renonv5

Dubai first gained distinction in the 1800s as a stopover for ships making their way to and from England to India....

This is no place for a history debate. But since I%u2019ve been here for a short period of 12 years, I certainly know a world about this place more than anyone who hasn%u2019t even set foot here. My comment was directed at the the article and to those who post comments like parrots without knowing the truth and also to those who think the capital of United Arab Emirates is Dubai. Also you would like to know that in UAE Abu Dhabi (the capital) and Sharjah has oil with the former enjoying the largest reserves. And yea, it is true if anyone says Dubai is corrupted. No media freedom etc.. But hey, don%u2019t go by everything that Youtube and Wikipedia have to say about Dubai. The ruler has gone to great lengths to make it the safest place on earth. Come see it for yourselves. It is muticultural and everyone gets along quite well.

[ramos937]

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.
----------------------------------------

Mr. Panjwani is to be congratulated. Any economy not based on some real underlying value is sure to collapse sooner or later. Some 10 years from now, if you visited Dubai, you will see huge rusting hulks of buildings no one had the money to finish. The man made palm shaped island will be reclaimed by the sea.

[sockpuppet4]

They want to act like elite greedy republicans that is what they get. Empty towers called money gods to them. Golden idols.

They deserve it. A lesson in greed the greedy never learn.

[fahren451]

4. Universal law supply Vs. Demand: nobody realises that the already anounced projects in dubai will need about an extra 6 million people to live in it!!!! (From Lagoons, meydan, dubailand, tatweer, mizin, industrial projects, emaar, bawadi, the world, the universe, palm deira, port rashid, waterfront, arabian canal, dubai world central%u2026.)Excuse me thats almost double the UAE population.

Posted by Fairplayer1 at 01:19 PM : Jan 03, 2009

That would be the root of the problem globally in a nutshell. There would not have been a need to look to subprime if prime had not been tapped out.

We have a DOA infinite growth based economy on a finite planet.

[fairplayer1]

15. regulatory body with no teeth: RERA is supposed to ensure that developers/real estate agents/ landlords/ follow the rules and regulations%u2026 what happens if a developer or an agent does not follow the law? NOTHING%u2026 just a 100,000 fine%u2026 comparing to the hundreds of millions at stake its a drop in the ocean.
16. Public Prosecution & Corruption: Everything in public prosecution is relative & variable%u2026. there are cases of misrepresentation by nakheel, for example selling thousands of villas and after 2 years just cancelling the project%u2026. nobody can make a complaint. Likewise several private developers & real estae agents operating in a fraudulent manner are let go off the hook.