Dubai Speculators Quit as Lending Drought Bursts Desert Bubble
By Glen Carey
Dec. 4 (Bloomberg) — The classified ads in Dubai read like an obituary for a real-estate market that until a few months ago seemed immune from the global credit crisis.
A Turkish investor, who identified himself as Sebat, took out 10 bright yellow ads in the Nov. 25 edition of Gulf News, the United Arab Emirates’ biggest newspaper, with the headline: “DIRECT FROM OWNER DISTRESS SALE!!!” Sebat said he used to be able to buy four or five properties at a time and sell them the next day for a profit of as much as 5 percent.
“There is panic in the market,” said Sebat, 52, who wouldn’t give his full name because he’s juggling 60 properties.
The property bubble in the desert emirate, home to the world’s tallest building, most expensive hotel suite and largest manmade islands, is bursting as scarce credit and slumping oil prices have international investors scurrying to dump assets. That may shatter Dubai’s goal of creating a sustainable economy by building the Persian Gulf hub for finance and tourism, forcing it to depend on oil-rich neighbor Abu Dhabi for financing.
“Dubai is more precarious than it has ever been,” said Christopher Davidson, author of “Dubai: The Vulnerability of Success” (2008, Columbia University Press). “If the property industry collapses in Dubai, it will be finished. Dubai’s relative autonomy will come to an abrupt end.”
The emirate’s push into luxury property developments and tourist attractions was diversification on “paper sand,” said Davidson, a professor of Middle Eastern affairs at Durham University in the U.K.