Remember when Dubai was said to have a quarter of the world’s construction cranes? Well, that was a myth. But so too was Dubai’s prosperity. The credit bubble’s deflation has hit Dubai very hard; and crushed the ex-pats who came in search of opportunity. Here’s the New York Times talking to a laidoff Frenchwoman named Sofia who came to work in advertising last year. She was so excited about prospects in the Gulf that she took out a 15-year mortgage on a $300,000 apartment:
“I’m really scared of what could happen, because I bought property here,” said Sofia, who asked that her last name be withheld because she is still hunting for a new job. “If I can’t pay it off, I was told I could end up in debtors’ prison.”
With Dubai’s economy in free fall, newspapers have reported that more than 3,000 cars sit abandoned in the parking lot at the Dubai Airport, left by fleeing, debt-ridden foreigners (who could in fact be imprisoned if they failed to pay their bills). Some are said to have maxed-out credit cards inside and notes of apology taped to the windshield.
The government says the real number is much lower. But the stories contain at least a grain of truth: jobless people here lose their work visas and then must leave the country within a month. That in turn reduces spending, creates housing vacancies and lowers real estate prices, in a downward spiral that has left parts of Dubai — once hailed as the economic superpower of the Middle East — looking like a ghost town.
No one knows how bad things have become, though it is clear that tens of thousands have left, real estate prices have crashed and scores of Dubai’s major construction projects have been suspended or canceled. But with the government unwilling to provide data, rumors are bound to flourish, damaging confidence and further undermining the economy.
US-style non-recourse loans look like heaven compared to debtor’s prison.
Laidoff Foreigners Flee as Dubai Spirals Down
ROBERT F. WORTH
New York Times; February 12, 2009