Word: dubai
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Saif Ahmed began living the Dubai dream five years ago. The University of Toronto business school grad moved to the Gulf city-state and quickly co-founded property developer Universal Canlink Inc. By 2006, the firm was turning over $15 million a year as its brochures lured foreign investors with tales of "meteoric" growth in the Dubai real estate market. Now, as the global credit crisis spirals from Wall Street to the Middle East, Ahmed is coming back down to earth. There's still interest, he explains, but the buying frenzy in Dubai is gone. "Before, people were buying blindly...
...Among the harbingers of the changing mood: Nakheel, the developer of Dubai's proposed kilometer-high skyscraper near Jebel Ali airport, recently announced that it is reassessing its overall staffing needs in line with "predictions of a downturn in the global economy." Boardrooms and coffee shops alike are buzzing with talk about the coming fall. The Cairo-based investment bank EFG-Hermes recently predicted that Dubai property values could tumble as much as 20% in the next three years. Share prices of Emaar, a public Dubai company that has become one of the biggest real estate developers in the world...
...sure, nobody's calling it a bust - not yet anyway. Midsized builders like Ahmed are still open for business. And a record 70,000 visitors attended Dubai's annual Cityscape property show this month, where mega-projects worth a total of some $180 billion were unveiled...
...Dubai and its real estate market are vulnerable to an international economic downturn, especially compared with many of its Gulf neighbors. As the region's premier business, transportation and tourism hub, it is by definition more entwined with the global economy. And in tight times, Dubai lacks the windfall oil profits that have enabled sister emirate Abu Dhabi, for example, to amass a financial cushion in sovereign wealth funds totaling hundreds of billions of dollars...
...Dubai's biggest risk is its daring reliance on debt to drive its breathtaking building boom. Last week, Moody's estimated that in 2006, the most recent year for figures, Dubai's government and public-sector company debt was at least $47 billion, a staggering 103% of GDP. The investment-rating agency said it expected Dubai's debt to continue outpacing GDP for another five years, exposing Dubai to pronounced financing and geopolitical risks...