Dubai

All sorts of news regarding the collapse in Dubai. For my part, this seemed [obvious] there was a bubble when this story came out.

One of my hobbies being bubble indentification, I am always pleased when projects like the above start receiving popular press.  More examples of this phenomenon can be found here.

By Ayesha Daya

     April 22 (Bloomberg) -- Dubai house prices may slump as

much as 70 percent from their peak late last year as demand

drops and banks fail to resume mortgage lending, prompting

mergers, UBS AG said.

     “We are still in relatively early stages of the property

down-cycle in United Arab Emirates,” Saud Masud, a Dubai-based

analyst at the Swiss bank, wrote in a report to clients dated

yesterday. “We believe risk-reward profiles are not yet

compelling for investors to consider market re-entry, hence

continued price declines are expected.”

     Economic growth in Dubai, the second-biggest of seven

states that make up the U.A.E., slumped after the worst

financial crisis since the 1930s hurt its property, financial-

services and tourism industries. The economy may contract 2

percent to 4 percent this year, Standard & Poor’s Ratings

Services said in a report last month.

     UBS downgraded Emaar Properties PJSC, the U.A.E.’s biggest

developer, and Union Properties PJSC to “sell” from

“neutral” as first-quarter results “will be disappointing.”

     House prices in Dubai have slumped at least 25 percent

since their peak, and apartments have tumbled 39 percent, UBS

said. Dubai’s majority expatriate population may drop 8 percent

this year and a further 2 percent in 2010 as residents lose

their jobs and leave within 30 days in accordance with the

emirate’s visa laws, the Swiss bank said.

                         ‘Consolidation’

     Property prices in Dubai quadrupled in the five years to

September 2008, helped by new laws allowing foreigners to own

property and a growing expatriate workforce. Falling property

prices now raise the prospect of rising loan defaults. Real

estate loans of U.A.E. banks, including mortgages, stood at

172.74 billion dirhams ($47 billion) at the end of 2008, or 17.8

percent of gross domestic product, the central bank said.

     Dubai may see “significant consolidation among its key

developers in addition to smaller, less visible ones,” UBS

said.

     The analyst started Abu Dhabi-based Sorouh Real Estate Co.

with a “sell” recommendation and downgraded Aldar Properties

PJSC to “neutral” from “buy.”

     Dubai and its state-owned companies borrowed $80 billion to

finance its transformation into a regional financial and tourist

hub as crude prices rose after 2002 and expatriates flocked to

do business in the oil-rich Persian Gulf.

     It has had to delay projects and seek funding as growth

slows in the region, which pumps almost a quarter of the world’s

oil, after crude prices tumbled about by $100 a barrel from

their $147.27 record in July. Crude oil for June delivery traded

at $48.55 a barrel at 12:07 p.m. London time.