On the surface, Dubai doesn't seem as hard hit by the global recession as one might think. At 11 o'clock on a recent evening, the emirate's gigantic airport was crowded with travelers facing 15-minute waits at passport controls. Restaurants and nightclubs are filled with a cosmopolitan mix of visitors and locals.
And Dubai hasn't completely lost its old pizzazz. On a recent evening, Mohamed Alabbar, the tireless chairman of Emaar Properties, the emirate's largest real estate developer, proudly walked with visitors on the newly opened promenade around the spectacular artificial lake that lies at the foot of the nearly completed Burj Dubai, the world's tallest building. As the voice of Andrea Bocelli sang Time to Say Goodbye, colored sprays of water danced high in the air like a fireworks display. Alabbar said the fountains, which are meant to outclass a similar waterworks at Las Vegas' Bellagio hotel and casino, had cost more than $250 million. "If it makes people happy, it's O.K.," he said.
But scratch a little deeper, and there are signs of malaise. Real estate prices are down by as much as 50%, and, because the authorities are pressuring developers to finish projects they have begun, empty space is piling up. According to a recently released survey from London real estate consultancy Knight Frank, over the past year Dubai has suffered by far the steepest drop in residential property prices among 32 developed economies surveyed worldwide, down 47.3% on average. (The second-worst market, Singapore, saw prices fall 27.7% over the same period, from June 30, 2008, to June 30, 2009.)
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