From The London Times
How Dubai's burst bubble has left behind the last days of Rome
Hugh Tomlinson and James McLean in Dubai
The engine of the black Corvette revved to a gasket-popping roar. Its driver leant out of his window. He was dressed in traditional Arab robes but wore a rubber wizard’s mask. He held an aerosol aloft and directed a jet of party foam into the air. Four-wheel drives plastered in pictures of Dubai’s Royal Family roared their engines back in approval. The cacophony was deafening.
On the opposite carriageway smoke billowed from the spinning back wheels of a new Land Cruiser as the driver pressed the brakes and floored the accelerator. This was the favourite way for many of the fervently patriotic and car crazy Emiratis to mark National Day in Dubai this week, the 38th anniversary of the founding of the United Arab Emirates, and one of the biggest celebrations of the year.
A mile away at the new Marina Yacht Club, Western expats were also working their way into a party mood. Deferential Filipino staff served a foamy lobster broth as an amuse bouche between courses. Beer and cocktails loosened tongues and a knot of dancers formed in front of the band. Tens of millions of pounds worth of powerboats bobbed at their moorings beneath the revelry on the terrace. Behind the boats a dozen skyscrapers framed the view, a few of the lights in their thousands of flats were on. “It’s so beautiful here,” said a pretty young Anglo-Indian woman clutching a large glass of chilled white wine and taking in the scene.
Welcome to the modern equivalent of the last days of Rome. The failure of Dubai World, one of the Emirate’s flagship companies, to honour a debt due last month has rocked this city state to its foundations. By any conventional logic Dubai is now a busted flush.
Superficially there has been no change to life here in the days since the failure to pay up triggered financial carnage but nowhere does superficial as convincingly as Dubai.
The Emirate has been struggling for many months, and if you scratch the surface the pain in this new and gaudy metropolis is palpable. Ross, who asked not to be identified, is one of countless expatriates who have been caught out by the collapse in Dubai’s once-booming property market.
Like many he bought a flat off-plan in what was a red-hot property market. Today he is trapped, his passport confiscated until he repays bank loans he used to invest in a property that may never exist. If his work dries up before he can clear his debts he will go to jail.
We met at a coffee shop in Dubai’s vast Mall of the Emirates. Around us were some of Britain’s most familiar high street names — Next, Debenhams, Virgin, Costa Coffee and Harvey Nichols. For now trade is still brisk. “I’m struggling to know what to do really,” he said.
Borrowing from family to supplement his savings, Ross, in his early thirties, moved with his family to Dubai from South London in late 2006, put down a £60,000 deposit and arranged a £30,000 loan to help to cover the initial instalments on a £350,000 two-bedroom apartment in the Dubai Sports City development.
“The plan was to let the place out to cover the loan and mortgage but it was scheduled for completion by the end of 2008 and they haven’t finished the ground floor yet,” he said. Without the apartment to boost the family’s income, the high cost of living forced them back to Britain. The debts became overwhelming in a city where non-payment is a criminal offence. Ross returned for some contract work but he was held on arrival at the airport by the police.
The Sports City developer, Middle East Development, told him that work on his property will restart before the end of the year but will take at least 18 months to complete without any further delays. Even if it were to meet this schedule it will be three years late.
Ross’s options are stark. He must keep working to pay off the bank, borrow from his family, leave Dubai illegally and lose the apartment or go to jail. “The worst-case scenario is that I have to lean on friends or family to get the money together. It’s that or jail — it’s a no-brainer really.” For now he is looking no further than Christmas, trying to decide whether to fly his wife and three children out to Dubai for the holiday.
He is far from alone. The handful of cars dumped by expatriates at the airport each week bear testament to that, and talk of a speculative property market gone sour.
The scale of overbuilding in Dubai, paid for by a phenomenal debt binge facilitated by British and international banks, is hard to conceive until you see it. The world’s tallest building, the 2,600ft Burj Tower, is due to open next month. Its spectral presence looms over the city, its pointed top a needle to the bubble.
On the road tunnel into Palm Jumeirah, the famous tree-shaped property development reclaimed from the sea, is a mural. It depicts Palm Jumeirah itself, the bigger Palm Jebel Ali and the gargantuan Palm Deira, as well as the other massive sea reclamation development The World. All are the responsibility of Dubai World’s real estate arm, Nakheel. Only one, Palm Jumeirah, on which houses were given to British footballers to help to lure ordinary investors, is all but complete.
A year ago Sheikh Mohammed bin Rashid al-Maktoum, the ruler of Dubai, began a fireworks display here so vast that it could be seen from space. This week one resident said that she had just knocked the annual rent on her Palm villa down by two thirds to a little more than £1,000 a month.
The other Palm projects and The World, despite the computer-generated images in the tourist brochures and websites showing green trees and completed houses, are a collection of imported rock and dredged sand on which building work has stopped.
Even more fanciful plans — for a massive seawater canal to be dug around the city to enable waterside properties in the desert hinterland, and another vast offshore island complex called The Universe, are no longer mentioned.
Work on dozens of new skyscrapers continues but building has slowed to a crawl on others. More than 40 per cent of newly built offices are already untenanted, and the available space is expected to double by 2011.
Thousands of the migrant labourers who were bussed in from their desert camps to build Dubai have left as the construction boom faltered. The investment bank UBS thinks that the population of Dubai is shrinking.
The borrowed money has not just gone on property. A state-of-the-art metro train system, operated by Serco, opened amid much fanfare in September at a cost of $7.6 billion. At 9.30am on a Thursday the station at Dubai airport’s cavernous Terminal 3 is empty. The train into the city, capable of carrying more than 640 people, has 21 on board.
Western expats who have been here for a decade or more are still well ahead on their investments even if, as some forecasts predict, house prices dip by 70 per cent from their peaks.
How Dubai's burst bubble has left behind the last days of Rome
Hugh Tomlinson and James McLean in Dubai
The engine of the black Corvette revved to a gasket-popping roar. Its driver leant out of his window. He was dressed in traditional Arab robes but wore a rubber wizard’s mask. He held an aerosol aloft and directed a jet of party foam into the air. Four-wheel drives plastered in pictures of Dubai’s Royal Family roared their engines back in approval. The cacophony was deafening.
On the opposite carriageway smoke billowed from the spinning back wheels of a new Land Cruiser as the driver pressed the brakes and floored the accelerator. This was the favourite way for many of the fervently patriotic and car crazy Emiratis to mark National Day in Dubai this week, the 38th anniversary of the founding of the United Arab Emirates, and one of the biggest celebrations of the year.
A mile away at the new Marina Yacht Club, Western expats were also working their way into a party mood. Deferential Filipino staff served a foamy lobster broth as an amuse bouche between courses. Beer and cocktails loosened tongues and a knot of dancers formed in front of the band. Tens of millions of pounds worth of powerboats bobbed at their moorings beneath the revelry on the terrace. Behind the boats a dozen skyscrapers framed the view, a few of the lights in their thousands of flats were on. “It’s so beautiful here,” said a pretty young Anglo-Indian woman clutching a large glass of chilled white wine and taking in the scene.
Welcome to the modern equivalent of the last days of Rome. The failure of Dubai World, one of the Emirate’s flagship companies, to honour a debt due last month has rocked this city state to its foundations. By any conventional logic Dubai is now a busted flush.
Superficially there has been no change to life here in the days since the failure to pay up triggered financial carnage but nowhere does superficial as convincingly as Dubai.
The Emirate has been struggling for many months, and if you scratch the surface the pain in this new and gaudy metropolis is palpable. Ross, who asked not to be identified, is one of countless expatriates who have been caught out by the collapse in Dubai’s once-booming property market.
Like many he bought a flat off-plan in what was a red-hot property market. Today he is trapped, his passport confiscated until he repays bank loans he used to invest in a property that may never exist. If his work dries up before he can clear his debts he will go to jail.
We met at a coffee shop in Dubai’s vast Mall of the Emirates. Around us were some of Britain’s most familiar high street names — Next, Debenhams, Virgin, Costa Coffee and Harvey Nichols. For now trade is still brisk. “I’m struggling to know what to do really,” he said.
Borrowing from family to supplement his savings, Ross, in his early thirties, moved with his family to Dubai from South London in late 2006, put down a £60,000 deposit and arranged a £30,000 loan to help to cover the initial instalments on a £350,000 two-bedroom apartment in the Dubai Sports City development.
“The plan was to let the place out to cover the loan and mortgage but it was scheduled for completion by the end of 2008 and they haven’t finished the ground floor yet,” he said. Without the apartment to boost the family’s income, the high cost of living forced them back to Britain. The debts became overwhelming in a city where non-payment is a criminal offence. Ross returned for some contract work but he was held on arrival at the airport by the police.
The Sports City developer, Middle East Development, told him that work on his property will restart before the end of the year but will take at least 18 months to complete without any further delays. Even if it were to meet this schedule it will be three years late.
Ross’s options are stark. He must keep working to pay off the bank, borrow from his family, leave Dubai illegally and lose the apartment or go to jail. “The worst-case scenario is that I have to lean on friends or family to get the money together. It’s that or jail — it’s a no-brainer really.” For now he is looking no further than Christmas, trying to decide whether to fly his wife and three children out to Dubai for the holiday.
He is far from alone. The handful of cars dumped by expatriates at the airport each week bear testament to that, and talk of a speculative property market gone sour.
The scale of overbuilding in Dubai, paid for by a phenomenal debt binge facilitated by British and international banks, is hard to conceive until you see it. The world’s tallest building, the 2,600ft Burj Tower, is due to open next month. Its spectral presence looms over the city, its pointed top a needle to the bubble.
On the road tunnel into Palm Jumeirah, the famous tree-shaped property development reclaimed from the sea, is a mural. It depicts Palm Jumeirah itself, the bigger Palm Jebel Ali and the gargantuan Palm Deira, as well as the other massive sea reclamation development The World. All are the responsibility of Dubai World’s real estate arm, Nakheel. Only one, Palm Jumeirah, on which houses were given to British footballers to help to lure ordinary investors, is all but complete.
A year ago Sheikh Mohammed bin Rashid al-Maktoum, the ruler of Dubai, began a fireworks display here so vast that it could be seen from space. This week one resident said that she had just knocked the annual rent on her Palm villa down by two thirds to a little more than £1,000 a month.
The other Palm projects and The World, despite the computer-generated images in the tourist brochures and websites showing green trees and completed houses, are a collection of imported rock and dredged sand on which building work has stopped.
Even more fanciful plans — for a massive seawater canal to be dug around the city to enable waterside properties in the desert hinterland, and another vast offshore island complex called The Universe, are no longer mentioned.
Work on dozens of new skyscrapers continues but building has slowed to a crawl on others. More than 40 per cent of newly built offices are already untenanted, and the available space is expected to double by 2011.
Thousands of the migrant labourers who were bussed in from their desert camps to build Dubai have left as the construction boom faltered. The investment bank UBS thinks that the population of Dubai is shrinking.
The borrowed money has not just gone on property. A state-of-the-art metro train system, operated by Serco, opened amid much fanfare in September at a cost of $7.6 billion. At 9.30am on a Thursday the station at Dubai airport’s cavernous Terminal 3 is empty. The train into the city, capable of carrying more than 640 people, has 21 on board.
Western expats who have been here for a decade or more are still well ahead on their investments even if, as some forecasts predict, house prices dip by 70 per cent from their peaks.
No comments:
Post a Comment