Dubai Property Crash 2009

What goes up will go down. For the past few days, more gloomy news about the meltdown of Dubai Properties market emerged and the crisis seems to be just getting started. Dubai aggressive and lavish construction sector is grinning to a halt. And that worried a lot of people. Credit financiers such the CitiGroup are now greatly exposed. Thousand of Asian labourers lose their jobs overnight and are forced to return home. The man behind Dubai properties and construction boom is now losing his credibility and image. Overall, this crisis is a bad business for everyone.

CNN: Shifting sands for Dubai's property dream

For the past decade, Dubai has been home to the greatest concentration of cranes anywhere in the world as billions of tonnes of concrete, steel and glass have refashioned the city skyline.

But the rapid growth of the past six years has slowed recently due to the global slump in property prices.

Hopes of a recovery have now been further imperiled by the news that the state-owned Dubai World has requested to delay paying its massive debts by six months.

Dubai has become a playground for architects as well as millionaires commissioning a string of audacious building projects aimed at helping reposition the city as the financial and cultural hub of the Middle East. Billions of dollars have been spent transforming the landscape, erecting buildings which continue to break records of all dimensions.

The Burj Dubai -- at 818 meter the world's tallest skyscraper, the vast Palm Jumeirah -- built on land reclaimed from the sea, the Dubai Mall -- the largest shopping center in the world and the Mall of the Emirates; home to the world's biggest indoor ski slope form part of a very long list of completed construction projects.

Some of these projects, like the Burj Dubai, suffer from a severe lack of practicality.

Dubai doesn't really need to have to build tall asides from prestige purposes. If you look at it, it's a really bad idea. It uses as much electricity as an entire city. And every time the toilet is flushed they've got to pump water half a mile into the sky.

Reuters: UAE markets dive on Dubai debt woes

United Arab Emirates stocks dived on Monday as investors waited for clarity on Dubai's plan to delay repaying billions of dollars in debt and government word on how it would tackle a crisis that has rattled global markets.

Dubai raised fears of a second bout of financial turmoil last week when it asked for a six-month repayment freeze on debt issued by state conglomerate Dubai World and its unit Nakheel, developer of three palm-shaped islands.

CNN Money: Dubai's threat to U.S. banks

The news that the sovereign wealth fund of Dubai requested a postponement of billions of dollars of debt this week could pose a big problem for U.S. banks.

The state-run investment company, Dubai World, owes about $60 billion. It rang up much of that in a building boom that included the world's tallest skyscraper and the Palm Islands in the Persian Gulf, settlements shaped like palm trees.

New York-based Citigroup has the most exposure to default risk at Dubai World, which a J.P. Morgan equity research note estimated at $1.9 billion.

TIME: The Lesson of Dubai: The Crisis Is Not Over

As we reach the end of a miserable 2009, signs continue to mount across the globe that the world economy is stirring back to life. The U.S. finally returned to growth in the third quarter, with its strongest showing in two years, India posted inspiring 7.9% growth and the results out of tiny Taiwan, one of the economies slammed the hardest by the global recession, were so impressive one economist beamed that the island "got its groove on." Stock markets, aside from a downward blip here and there, have generally been buoyant. During this season of Thanksgiving and holiday cheer, there seems to be good reason to give thanks and be cheerful.

Or maybe not. The worst of the crisis is almost certainly behind us, but that doesn't mean the crisis is over. Lying ahead are a slew of unresolved problems, policy challenges and, no doubt, further surprises. Unemployment remains a serious global issue, and may yet get worse; excess capacity left over from the boom years haunts the recovery; and the drastic stimulus programs utilized to fight the recession are creating a new menu of potential troubles.

That was made clear on Nov. 25 when the city-state of Dubai shocked the global investment community by asking creditors of its main corporate arm, ports-and-property conglomerate Dubai World, for a six-month payment standstill on its almost $60 billion of liabilities. The surprise hit stock markets in Asia and the U.S., while sending investors scrambling for safe havens like the U.S. dollar. Experts have since engaged in a rabid round of speculation over what the Dubai debt crisis might mean for the world economy. Some see the problem as little more than a big real estate bust.

SMH: Dubai shakes and the world shares its pain

The move to delay payments on billions of dollars of debt has embarrassed neighbouring Abu Dhabi and caused a crisis of confidence across the world, write Richard Spencer and Edmund Conway.

We already knew that, long before it announced last week that it wanted to delay payments on billions of dollars of debts owed by its Dubai World (DW) state holding company. But the trouble caused by a collapse in the property market put the city on a par with other states around the globe. This announcement was of a different order. It damaged the credibility of the city's government and, by extension, the United Arab Emirates as a whole. That is what is of concern to the Presidential Palace's occupant, Sheikh Khalifa bin Zayed al-Nahyan, overseer of Abu Dhabi's oil and sovereign wealth funds, ruler of the city and President of the UAE.

For months, when foreign journalists mocked the deserted, vainglorious building sites, Dubai's rulers accused them of mounting a vendetta against an Arab city that had dared to be ambitious. At briefings, questions about the city's development model were contemptuously glossed over. No real mistakes had been made. Dubai was pulling through. The skyscrapers would be finished.

In many senses, Dubai's problems - high debt, over-speculation, a rapidly-deflating housing boom - are reflected across the Anglo-Saxon world and beyond. Whether or not the emirate defaults on its debt, the drama has underlined the fact that a swathe of countries - from Japan, Greece and Italy to Britain - suffer an immense public debt burden which will have to be repaid over the coming years.

It was for this reason that, in the wake of the Dubai news, the credit default swaps which signify the risk of certain countries defaulting jumped sharply higher.

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