Word: dubai
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...recovers." But he acknowledges that "it's a painful process, and we are only at the beginning." The impact won't be felt across the board. Barring a financial cataclysm, London will retain its position as Europe's preeminent financial center. Some wealth management may migrate to Singapore or Dubai, rapidly emerging regional centers, and some of the back-office jobs that are cut may never return. "As in any business, there will be more pressure to take more support roles out of London, to Asia or just to cheaper places in Britain," says Owen Jelf, who heads...
...underlying reason for the relative lack of panic so far is that Dubai real estate remains a financial haven for wealthy individuals from riskier nearby countries like Iran and Pakistan. What's more, Dubai's real estate sector is dominated by a handful of major companies - collectively dubbed "Dubai Inc." - that are directly or indirectly owned and controlled by the government. This means, analysts say, that Dubai authorities could effectively stave off a bubble burst by keeping finished projects off-line until market conditions improved. In the event of a systemic threat, Dubai can probably rely on super-rich...
...Dubai officials insist that they can meet their debt obligations for the next two years. Analysts point out, however, that the credit squeeze compounds a growing challenge to Dubai's revenue streams. The most obvious is the halving of the price of oil from $147 per bbl. to $70 per bbl. since July, sending Middle East stocks tumbling and rendering regional investors increasingly cautious. Likewise, a global recession is likely to tighten the belts of the international investors and holiday makers that Dubai relies on for its real estate and tourism developments. Even before the global crunch, banks...
...doom and gloom, however. The UAE government has funneled $33 billion into the country's banking system to calm the nerves of depositors and investors, promising coverage to foreign as well as local institutions. If the credit crunch shakes out speculators, known as "flippers," from Dubai's real estate market, that could help stabilize wildly inflationary conditions. "I am not necessarily thinking we are in a crash scenario," EFG-Hermes managing director Hashem Montasser tells TIME. "There is still genuine demand. Economies here are still growing. Overall, the economic situation is still very sound. We will see a deceleration...
...That kind of reassurance is what keeps Dubai property builders like Saif Ahmed plugging away. Believing that foreign interest in Dubai is alive, he's planning a major sales exhibition in Los Angeles in December. He acknowledges, however, that the days of the easy sell may be over. "People are more educated and calculated about their investments," Ahmed explains. "Now they are asking for a more detailed sales pitch. They want to know about the developer's track record." As it faces the most serious financial challenge in its history, Dubai Inc.'s reputation is now on the line...