Dubai has been much in the news lately, with the possible/probable/never-going-to-happen collapse of Dubai World. Who knows what is really going on and what the outcome is likely to be? For sure, Abu Dhabi will prop Dubai up to an extent, but where will they draw the line? The specter of foreclosure looms over much of Dubai Worlds assets out side of Dubai, but there also remains the possibility that some properties within Dubai may be foreclosed upon also.
The last attempted auction of foreclosures in Dubai did not go well. In fact two auctions have been held and the property owners (banks) refused to be realistic on prices, despite retail prices having fallen some 70% from peak and no sales were made. None.
This is partly due to untested seizure laws and unrealistic sellers. Credit was almost unheard of in the Middle East until recently at least on this scale. Muslim law forbids that charging of interest and the recent almost-default of a $3.5 billion Islamic bond would have been a disaster had Abu Dhabi not stepped in.
The Dubai property market is suffering there can be no question of that, and the government s not helping the situation by either ignoring questions or producing spurious press releases to suggest that all is well. All may be well if you can walk away from $70 billion in debt, but that my not be the case further down the food chain.
We shall see what this year brings, but from my perspective it look like more defaults, more collapsed developers, more lawsuits and more confusion. Dubai has several issues to overcome, not least of which is creating trust within the smaller developer and investor communities neither of which are happy at the moment.