Saturday 7 March 2009

Gaudí would have gawped Dubai wakes up to harsh realty

Months into this financial crisis, we are by now used to government rescues of banking and insurance behemoths, but to see a city-state that needed a bail-out you have to travel to Dubai. I arrived there on holiday just days after Abu Dhabi had ended months of speculation about Dubai's grim financial health by throwing a $10bn lifeline, buying half of the five-year bonds issued by the city's government.

America's subprime real estate loans might have started this mess, but where else would you find what could be called a submarine real estate crisis - the steep drop in prices of villas and apartments in the Palm, a series of man-made islands built by a government-owned developer. Just three years ago, Dubai was constructing the world's largest building, preparing to open a giant indoor ski slope with chalets, and selling islands shaped like places to the world's rich and foolish. Much of the world's press was enthralled. "Given the scale of its ambition, could [Dubai] become the most important place on earth?" asked the Guardian in February 2006.

While being taken on a tour of "The World" by speedboat just a week after that article appeared, I asked to see a house - but there was a snag. "Greenland", which had been the site of the show villa, had just been sold, and the new one, if I remember correctly, on "California" had not yet been built. I may have the names wrong; it was all a blur.

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