Monday, March 8, 2010
Bye Bye Dubai
It is good to be back in the United States! I just spent a month and half in Dubai assisting a friend who owns a construction company. The financial environment in Dubai is horrendous and all those rich Arab tycoons wrapped in traditional headscarves sipping fruit juice cocktails watching Russian models walk along the beach are fleeing the country.
A six-year boom that turned sand dunes into a glittering metropolis, creating the world's tallest building, its biggest shopping mall and, some say, a shrine to unbridled capitalism, is grinding to a halt. The real estate bubble that propelled the frenetic expansion of Dubai on the back of borrowed cash and speculative investment has burst.
Half of all the construction projects, totaling $582 billion have either been put on hold or cancelled, leaving a trail of half-built towers on the outskirts of the city stretching into the desert.
Local banks have stopped lending and the stock market has plunged 70%. Scrape beneath the surface of the fashion parades and VIP parties, and the evidence of economic slowdown are obvious. Luxury hotels are three-quarters empty. Shopkeepers in newly-built malls are reporting a drop in sales.
In Dubai you expect to see a Ferrari parked beside a Rolls-Royce. However now they are both equipped with scruffy For Sale signs taped to the windows.
It is good to be home!
Posted by Patrick Henry at 8:01 AM