Ferrari Abandoned in Dubai as Expat Fled the Country

An amazing story, not by the facts but the scale of it: A rare $400,000 Enzo Ferrari abandoned in Dubai as British owner fled the country. Indeed, we already reported several years ago that expats were leaving the country, abandoning their flats and cars — all bought on credit, of course. Now, people start abandoning collector Ferraris! Unfortunately, there's still no end in sight, these are just a warm up for the things to come in the rest of the world.

Emirates’ biggest developer's revenue from apartment sales drop by 81%

Dubai's property bubble was one of the fastest one to rise, and also one of the fastest one on the decline. Prices are already down more than 60% and the estimate provided by the research form of a further 25-30% seems to me to be too optimistic: expect probably another 50% drop until the real bottom is hit.

(Bloomberg — March 15) — Emaar Properties PJSC (EMAAR), the United Arab Emirates’ biggest developer by market value, said revenue from apartment sales declined 81 percent in the first quarter and from villa sales 50 percent amid weak property demand.

Income from apartment sales dropped to 375 million dirhams ($102 million) and from villas to 60 million dirhams, according to Emaar’s earnings statement posted on the Dubai Financial Market today. Overall revenue fell 31 percent to 1.98 billion dirhams in the first quarter, while profit slumped 45 percent. Emaar reported first-quarter earnings on April 24 and provided a breakdown of revenue today.

Emaar will need to "start relying more on international projects" to compensate for a decline in apartment deliveries in Dubai, said Majed Azzam, a Dubai-based analyst at AlembicHC Securities. Prices and margins are lower in international markets and Emaar’s earnings will be "hit this year, until the company resumes sales in Dubai," he said today.

The company, the developer of the world’s tallest tower in Dubai, was hurt by a more than 60 percent slump in property prices in its home market as speculative demand waned and banks tightened lending since mid-2008. Emaar’s sales in the U.A.E. contributed 79 percent of revenue in the first quarter compared with 96 percent a year earlier, according to today’s statement.
[...]
House prices in the U.A.E. may drop an additional 25 percent to 30 percent as population growth stagnates and more properties are put onto the market, according to a report by Dubai-based Rasmala Investment Bank Ltd. in March. Emaar said on May 7 it formed a team of senior managers and external consultants to develop a five-year action plan for the company.

H/T to SS for the link

Dubai property prices decline steadily, as predicted

As predicted in my previous posts and by previous reports, Dubai property prices are still collapsing, and the rate of the collapse is increasing. Note that the declines mentioned here are from the previous quarter, not from the previous year (which is the normal way of reporting).

Jan. 9 (Bloomberg) -- Home prices in Dubai, the property market that had the biggest reversal because of the financial crisis, fell as much as 5.1 percent in the fourth quarter from the previous three months and more declines are “unavoidable,” Cluttons LLP said.

Cluttons, a London-based property broker, said villa prices dropped 5.1 percent, while apartment values declined 2.4 percent in the fourth quarter from the third. The broker expects 35,000 homes to be completed in Dubai over the next two years. Property prices in the emirate slid by almost 60 percent from their peak in mid-2008 after the credit crisis squeezed speculators out of the market and forced banks to lend less, Ahmed Badr, analyst at Credit Suisse Group AG said today.

“As supply continues to increase, drops in values will be unavoidable,” Cluttons said. “We are continuing to see the flight to quality in both the sales and rental markets as the more desirable locations become increasingly affordable.”

Most homebuyers have budgets of no more than 1.5 million dirhams ($410,000) and only about 6 percent of them would consider properties costing more than that, the broker said. Rents of apartments fell 3.3 percent in the fourth quarter, while villa rents declined 3.2 percent from the previous quarter, Cluttons said.
[...]
Office rents fell in the fourth quarter as new buildings added to the amount of empty space. Dubai had 2.6 million square meters (28 million square feet) of offices under construction in June, the third-highest amount after Shanghai and Moscow, Colliers International said in a report in October.

Owners of office space in Dubai are becoming increasingly flexible, offering incentives to attract tenants. They include reduced rents and regular payment terms as well as rent-free periods and longer leases. Some landlords are even offering to pay brokers on behalf of tenants, Cluttons said.

Dubai Property Prices Will Continue to Fall for Many Years

I have been posting about Dubai for the past year, and so far, my forecasts have been quite accurate.

For about a couple years, I have been writing that Dubai was on the brink of collapse and mentioned the The Skyscraper Curse which I find to be very compelling.

Just a month ago, I wrote a post titled Some of Dubai's Office Buildings Will Be Empty Forever concluding that I wouldn't be surprised to see another 30 to 50% decline from here, in Dubai.

Here are some quotes from a Bloomberg report, giving more up to date information about the state of collapse in Dubai.

Dec. 15 (Bloomberg) -- Dubai property prices may drop for the next two years, extending a decline in the Persian Gulf sheikhdom that’s already cut values by more than 60 percent since the 2008 peak.

Residential values may fall as much as 20 percent more by the end of 2012 if new homes are built as planned, according to broker Landmark Advisory in Dubai. Cluttons LLP, a London-based property consultant, and Jones Lang LaSalle Inc., the second- largest publicly traded commercial property broker, also forecast further declines.

About 48,000 homes will come on to the market in the next two years, or about 12 percent of existing supply, according to Jesse Downs, director of research at Landmark. An influx of foreign buyers sparked a construction boom as prices rose by 79 percent to mid-2008 from 2007 before the financial crisis caused lenders to tighten credit and speculators left the market.

12 percent is quite a big number. I'd be curious to find out what's the current vacancy rate on existing properties.

“There is still no parity between supply and demand,” said Paul Richard, associate director at Cluttons in Dubai, which estimates that 35,000 homes will be completed through 2012. “You’re looking at a good two years” for Dubai’s market to reach bottom, he said.

[...] Home prices fell 6 percent in the quarter from the previous three months, Colliers International said on Nov. 7.

Almost half of Dubai’s planned real estate projects, from offices to villas, were canceled as buyers defaulted and access to funding became harder. Residents who lost their jobs had to leave the country within 30 days, causing many to abandon their cars and mortgages.

Well, that's actually a good news. It means that less money and resources are going to be wasted.

Emaar Chairman Mohamed Alabbar said last month that Dubai’s market has bottomed out “without a doubt,” and “not much” new housing supply is coming on the market.

Predictions of an end to the slump have proven overly optimistic in the past. In May 2009, Markus Giebel, then the chief executive officer of Deyaar, said the property market would bottom out that year. In the same month, Landmark Advisory said home values may stop sliding in the fourth quarter of 2009.

Economists are always making over optimistic predictions. No surprises here. But of course, no one is going to question the predictions of growth in the US and the rest of Europe, or profits and equity increases, etc.

“Without an influx of demand from outside the country, forget about it,” Cluttons’s Richard said. He estimates that home prices will drop 5 percent to 10 percent by next summer.

Attracting foreigners became more challenging after the government changed residency rules last year. From 2002, property ownership qualified the buyer for a five-year residency visa that was easily renewed. That changed in May 2009, when new United Arab Emirates regulations cut the length of residency visas to six months and required holders to leave the country and return for renewals, paying 2,000 dirhams ($546) per visa each time.

That was a very "clever" move indeed. I never understood why people would ever want to live in Dubai, except for making a lot of cash for a few years. But now, with a 6 month visa and more than $500 to renew it, it's become a hassle. Basically, they don't want to create an income tax, so they've came up with this hidden "residency tax" of $1000 per annum. Add admin and bureaucracy on top...

“The visa rules have been highly damaging and definitely shattered people’s confidence,” said Ludmila Yamalova, a partner at law firm HPL Yamalova & Plewka JLT. “Many bought property just because that would enable them to live here. They had their five-year residency and built their lives around it. Now they don’t have that security.”

Well, it was very clever to take a 25 or 30 year mortgage to get a 5 year residency in the first place. Things change, specially governmental promises: they never keep up their words.

[...] Downs predicts home prices will drop 15 percent to 20 percent by 2012 if the most residential buildings currently under construction go onto the market as scheduled.

“If the pipeline is delayed, that will only prolong the cycle,” she said. Properties won’t see renewed demand “until prices come down further and buyers have greater certainty over long-term rent yields.”

Some of Dubai's Office Buildings Will Be Empty Forever

Quite an interesting statement, coming from the CRBE: "Dubai’s Worst Office Buildings Will Be Empty Forever". Yet another Bubble-Economy has collapsed, but markets have still not priced and when they do, bad things will happen to the currencies of the region, the CDS traders, and all the debt holders — because of course, even if the building stay empty until the end of time, some paid for them to be built, and that money has been spent.

Oct. 14 (Bloomberg) -- Some Dubai office buildings are so ill-conceived and poorly located that they will never be occupied, while others may command no more than the cost of maintenance, according to CB Richard Ellis Group Inc.

“Some buildings will be permanently vacant and will never be let because they are wrongly located, they are of poor quality or have the wrong legal structure in place,” Nicholas Maclean, Middle East managing director for the U.S. property broker, said in an interview.

Speculation fueled Dubai’s property market after foreigners were allowed to buy real estate in parts of the emirate in 2002. Buyers with no experience in property management flocked to purchase floors in planned office buildings before any work started, resulting in poorly finished towers in inconvenient locations with multiple owners, Maclean said.

My question is: wasn't this the case in almost every country? The US, Canada, Australia, the UK, most of Europe excluding Germany, etc.?

Such places have to compete for tenants in a Dubai market with an overall vacancy rate of 40 percent, with newly developed areas on the outskirts hit the hardest. At least 20 million square feet (1.85 million square meters) of space, about 40 percent of Dubai’s existing office supply, will be added in the next four years, CBRE estimates. That will put further pressure on prices that slumped by 60 percent on average since the peak in mid-2008.

60% drop in 2 years. That's an impressive world record, I would say! And you still have 40% vacancy rate...

“The further you are away from Sheikh Zayed Road, the less desirable the location and therefore the quicker rents fall,” Maclean said, referring to the main business thoroughfare near Dubai’s coast. “Why would you go there when you can get accommodation for a relatively low price closer to town?”

Landlords are providing incentives such as rent-free periods of as long as 12 months on seven-year leases and fitting-out allowances to attract tenants, Jones Lang LaSalle said in a report earlier this month.
[...]
Dubai had 2.6 million square meters of offices under construction as of June, the third most in the world after Shanghai and Moscow, Colliers International said in a report this month.
[...]
The Dubai Financial Market Real Estate Index [...] has fallen 85 percent from a record high in September 2005.

85% drop in 5 years... That's what we're going to see everywhere in Bubble Economies, including China and the UK, and yes, including Australia and Canada. Unfortunately, 85% is not the end, and prices will decline a lot more. I wouldn't be surprised to see another 30 to 50% decline from here, in Dubai, given the facts mentioned in this report.

On Dubai owned Dubai World default

First, a note to those who are reading on the media that "no one saw it coming": It was so obvious it was coming... It had actually already happened, in my opinion! See for yourself below:

• 2009-02-06 Dubai on the brink of collapse - The Skyscraper Curse [update]
• 2009-02-24 Dubai receives a $10 billion bail out by the UAE Central Bank
• 2009-08-16 Dubai collapses to uncharted territory
• 2009-09-14 Dubai's Wealth Fund collapses

Second, a note to all those that think that "markets overreacted" and that "Dubai World's liabilities are so small": the problem is not in my opinion that the liabilities are small or not. It's rather that it just confirms to those who thought the worst is over that they couldn't be further from the truth. It's now time for the sovereigns to default. That's what is scary and dangerous, not the tiny $60 billion of liabilities that Dubai World is defaulting on.

Below, some interesting quotes:

Nov. 26 (Bloomberg) -- Dubai shook investor confidence across the Persian Gulf after its proposal to delay debt payments risked triggering the biggest sovereign default since Argentina in 2001.

The cost of protecting government notes from Abu Dhabi to Bahrain rose, extending the steepest increase since February as Dubai World, with $59 billion of liabilities, sought a “standstill” agreement from creditors. Its debt includes $3.52 billion of bonds due Dec. 14 from property unit Nakheel PJSC. Dubai credit-default swaps climbed 90 basis points to 530 after yesterday increasing the most since they began trading in January, CMA Datavision prices showed.
[...]
Dubai, ruled by Sheikh Mohammed Bin Rashid Al Maktoum, borrowed $80 billion in a four-year construction boom to transform the economy into a regional tourism and financial hub. The emirate suffered the world’s steepest property slump in the global recession, with home prices dropping 50 percent from their 2008 peak, according to Deutsche Bank AG.

Moody’s Investors Service and Standard & Poor’s cut the ratings on Dubai state companies yesterday, saying they may consider Dubai World’s plan to delay debt payments a default.

My Comment: as usual, ratings agencies and analysts didn't see it come and react after the fact.

Gulf region default swaps jumped, with contracts linked to Bahrain adding 29 basis points today to 223.5, the biggest increase since Feb. 18. Contracts linked to Abu Dhabi added the most since February yesterday, climbing 36 basis points to 136.5 and were another 23 basis points higher at 159.5 today, according to London-based CMA. Qatar default swaps rose 13 basis points to 117, adding to yesterday’s 11 basis-point increase.
[...]
Dubai World had $59.3 billion in liabilities and $99.6 billion in total assets at the end of 2008, subsidiary Nakheel Development Ltd. said in an August statement. Dubai owes $4.3 billion next month and $4.9 billion in the first quarter of 2010 through government and corporate debt, Deutsche Bank AG data show.
[...]
“Nakheel is now standing on the brink of failure given the astonishing amount of cash Dubai would have to inject on it in order to see the enterprise survive,” said Luis Costa, emerging-market debt strategist at Commerzbank AG in London. “Events like this are a perfect storm.”

Dubai credit-default swaps now rank as the fifth most expensive worldwide, exceeding Iceland’s and Latvia’s.
[...]
Dubai World will ask creditors for a “standstill” agreement as it negotiates to extend maturities, including $3.52 billion of Islamic bonds due Dec. 14 from Nakheel, Dubai’s Department of Finance said in an e-mailed statement yesterday.

Dubai World’s more than 70 creditors face the prospect of writedowns on as much as $60 billion of debt if they haven’t unloaded their holdings and the state-owned company fails to win additional support from Abu Dhabi.

The biggest creditors are Abu Dhabi Commercial Bank and Emirate NBD PJSC. Other lenders include Credit Suisse Group AG, HSBC Holdings Plc, Barclays, Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc, according to a person familiar with the situation. Barclays slumped as much as 6.9 percent, the biggest intraday loss in a month, while RBS sank as much as 8.3 percent. Lloyds and Credit Suisse dropped more than 3 percent.
[...]
The debt “restructuring may be considered a default under our default criteria,” S&P said in a statement.

My Comment: oh really??

(Times Online) The Government of Dubai said today that it will not stand behind its wholly-owned subsidiary Dubai World, prompting fears that the company’s creditors could lose billions of dollars.

Today's comment, from Abdulrahman al-Saleh, the director general of Dubai’s Department of Finance, effectively confirms that [the] country does not have enough money to repay Dubai World’s $60 billion of liabilities. Deloitte, the accountancy firm, has been called in to restructure the giant business.

Dubai's Wealth Fund collapses

Bubble-economy correspond 100% to the definition of Dubai's economy. If you thought the US, the UK, Spain and so forth were bubble economies, well, wait to see Dubai!

Probably the biggest real estate bubble in history after Japan's end of '80s bubble was Dubai's real estate market (who wants to buy a flat in the middle of the desert for the price of luxury houses in NYC, London or Paris??) well, it now appears that their sovereign funds were investing as wisely as Cerberus and are as leveraged as private equity funds (10 times leverage, meaning that a 10% loss wipes out the fund).

The bad news is that with 10 times leverage, the sovereign wealth fund gets wiped out, but also the creditors (i.e. major banks who were stupid enough to finance those LBOs).

Here are reports from Bloomberg which are very much worth reading.

Sept. 11 (Bloomberg) -- Istithmar World, the Dubai sovereign wealth fund, is halting investments as part of a restructuring effort after spending more than $25 billion this decade on stakes ranging from a yacht marina to luxury retailer Barneys New York, according to people familiar with the plan.

The process may result in a sale of the fund or its assets, they said. Istithmar, run by David Jackson, said this week that co-chief investment officers John Amato and Felix Herlihy would leave the firm. Jackson’s job is under review, the people said.

Sept. 14 (Bloomberg) -- Dubai investment firm Istithmar World may be the first sovereign wealth fund to liquidate after a $27 billion spending spree financed largely with borrowed money, people briefed on the matter said.

Unlike government-controlled funds in Kuwait and Abu Dhabi, flush with cash from oil production, or in China, backed by export earnings, Istithmar fueled purchases such as the takeover of Barneys New York by borrowing as much as 90 percent of the money, the people said. Istithmar’s parent, Dubai World, tapped Middle Eastern and European banks including Barclays Plc, Royal Bank of Scotland Group Plc and Deutsche Bank AG, leaving those three with combined debt holdings of at least $1.5 billion, the people said.
[...]
Istithmar contributed about $2.5 billion of its own cash to back $27 billion of purchases since 2003. [...]
Many of the deals have soured.[...]
“They realized they had defined the top of the market,” said Peter Slatin, editorial director at Real Capital Analytics Inc.[...]
One example of risky investing, according to Turner, came in 2007, when Dubai World bought about $5.5 billion of MGM Mirage stock at between $82 and $95 without any hedge. The stock now trades at about $12.

“The attitude there was: We’re a private equity firm and as such we don’t need to hedge our investments because we understand the inherent risks and believe in our decisions,” Turner said.
[...]
Refinancing Dubai’s debt became more difficult with the onset of the global credit crisis as lending froze. It has about $80 billion of outstanding corporate and government debt, according a report by Moody’s in February. That almost matches the emirate’s $82 billion gross domestic product in 2008, the report said.

“We’ll be more careful now,” Sheikh Mohammed told reporters in Dubai on Sept. 9.
[...]

Previous related posts are available here.

Building literally collapses in Dubai

Just a couple of hours after I published the previous post on Dubai, reports about the actual collapse of a building in Dubai emerge. There are currently not a lot of information flying around, but it seems like a building still under construction collapsed today:

16 August 2009 An eight storey building under construction in Deira, Dubai has collapsed destroying more than ten cars, a police officer said.

Half of the building collapsed while the rest remained standing, the official said. At the time of the accident no work seemed to be taking place on the building which had appeared ready for residents to move in.

DUBAI, Aug 16 (Reuters) - A building under construction collapsed in Dubai on Sunday, but there were no reports of injuries, police sources said.

"A building on al-Ittihad road collapsed, police are investigating, but so far there are no injuries," a source said.

While this piece of news is not very important, I just mentioned it for the many many visitors who are arriving on my blog search fall "Dubai collapse". Obviously, the other posts deal with "economic/building collapse", not the actual, physical collapse of the building.

Dubai collapses to uncharted territory

About six months after my initial post about the Dubai (2009-02-06 Dubai on the brink of collapse - The Skyscraper Curse - oddly enough, reaching in the top 3 more read posts of my blog), I thought it would be interesting to provide a follow up on the situation in the middle east, and more specifically, the bubble-deserts (Dubai and Qatar mainly).

(WSJ - 4th of August 2009) DUBAI -- Home values in Dubai have fallen by about half from their peak late last year in the wake of the global real-estate slowdown, a widely watched index of Dubai property prices showed Monday. [...]

[The report is mainly bullish, still trying to revive the idea that buying homes in a desert make you rich, but there's one bearish statement in the whole report:]

Saud Masud, a real-estate analyst at UBS, said a decelerating price fall doesn't necessarily point to market recovery. "The underlying trends are not supportive of a recovery in the market anytime soon," he said.

(AFP - 16th of August 2009) DUBAI — Just one year ago, property prices in Dubai were surging to record peaks undeterred by a real estate slump in major markets, but they have since gone into free fall and have yet to find the bottom.

Market watchers in the former Gulf boomtown differ slightly on the magnitude of the decline so far, but all seem to agree that the prices of Dubai property, which was selling unchecked over the past three years, should drop further.

"The decline in prices still has a little bit to go before bottoming out," said Sana Kapadia, vice president of equity research at the regional investment bank EFG-Hermes. "We expect a total drop in Dubai of between 50 to 60 percent from peak prices in 2008. We have seen a cumulative decline of 45 to 50 percent so far in Dubai," she told AFP.
[...]
It would be a terrible mistake to believe that we are out of the woods," said Jeremy Mayhew-Sanders, head of investments and development at Sherwoods Property, referring to such few recovery signs.

He said that some prices had improved due to an artificial shortage of units on offer in some areas, as low prices had pushed some owners to pull their units from the market.
But a shortage of new housing units -- a major catalyst for the surge in prices and rents over the past few years -- should be the least worry for buyers as thousands of new units are being delivered this year, with more scheduled to be ready next year.
"Many under-construction projects are nearing delivery time, bringing more units into the market... There is a lot of supply that has to be absorbed," Kapadia said.
Landmark Properties projects some 22,700 residential units to be delivered by the end of this year, with 40,400 others to be delivered in 2010, although many projects have reportedly been put on hold for lack of cash and interest.

And the same story applies to Qatar. These bubble economies are bound to collapse, there is no other ending possible. And when depopulation becomes a major issue, you know the end is near...

Qatar is facing a significant oversupply of real estate in 2012 as its population falls, leaving swathes of property development empty, according to two new reports.
[...]
This could lead to a 'significant overhang' of real estate, they claim. 'While expatriates constitute 90% of the workforce, which is similar to Dubai, a much bigger portion of those are blue collar workers who are more likely to leave in 2012,' the bank report said.

The company is also warning about de-population. Al Mansoory said that the latest published figures show that it has already fallen from 1.9 million to 1.6 million. [That's 15-20% !]

Finally, looks like the new way of making profits of real estate in Dubai is legal claims:

The collapse of Dubai’s once-booming construction industry has created a backlog of legal claims totalling almost £3 billion.

Disputes over unfinished contracts and outstanding payments are stacking up in the emirate’s arbitration court, according to Building magazine.

This year, more than 180 claims have been filed, mostly by international contractors. British firms are estimated to be owed at least £400m on contracts in the United Arab Emirates, many of which relate to work for state-backed investment and development firms.

Atkins, the £700m support-services giant, is among the firms to have publicly admitted being owed money in Dubai. Forensic accountants and legal experts are starting to flood in. Price Waterhouse Coopers has moved a team of 20 investigators to the emirate in recent months.

Of course, even if legal claims and fees will add to GDP, they are destroying value, not creating wealth in the general sense for the population.

Dubai receives a $10 billion bail out by the UAE Central Bank

As I mentioned just about a week ago, Dubai was on the brink of collapse, and indeed, it would have collapsed if it didn't get bailed out by the UAE Central Bank.

Feb. 23 (Bloomberg) -- Dubai shares surged the most in three months after the United Arab Emirates’ central bank bought $10 billion of Dubai bonds, easing concern that the emirate’s companies will be unable to refinance debt.
[...]
Dubai, home to the world’s tallest building, most expensive hotel suite and largest manmade islands, needs to repay $15 billion of debt maturing this year, Moody’s Investors Service said this month.
[...]
Dubai borrowed $80 billion to turn itself into a regional financial and tourism hub, according to government figures. Real-estate prices have fallen 25 percent in Dubai from September’s peak

Feb. 23 (Bloomberg) -- The United Arab Emirates’ central bank stepped in to support Dubai after concern increased the emirate will struggle to repay its debt as global financial turmoil pushed up credit costs and burst a real-estate bubble.

For info, $10 billion is about 20% of Dubai's GDP!

And also, do not forget that this probably just means inflation, since central banks do not have money to lend, they just create it.

Just to remind how economic forecaster are myopic, here's what you can read on the UEA web site, written after the collapse started in the US:

Posted on 29/03/2008
Dubai's real gross domestic product (GDP), which surged to a record Dh198 billion in 2007, is predicted to sustain an average growth rate of 11 per cent for the next eight years. The main driver of this remarkable growth - outpacing the average growth rate forecast for the GCC - will be the non-oil sector, growing at a spectacular pace.

It looks like people who can't even predict what is going to happen just a couple of months down the road were trying to predict what would happen for the next 8 years! 11% of growth per year during all that period... Complete nonsense... This guys really don't understand compounding... (And GDP is supposed to be calculated after discounting for inflation as well).

Dubai on the brink of collapse - The Skyscraper Curse [update]

In just a matter of 48 hours, I ran into a couple of articles describing the fall of the Dubai bubble economy, hugely driven by speculation in real estate (and propelled by easy borrowing and lax lending standard). I went to Dubai just for a week-end in January 2006 and I could tell that the fall will come and that it would hit hard.

Here are some quotes from a the Times Online and Bloomberg - and also very interestingly, Bloomberg made me discover an economic indicator that I had never heard about: the Skyscraper Curse. After digging, it appears that not only is this indicator is not new at all, but that it is quite reliable, for various reasons that will follow.

Let's first take a look at the Times Online article [emphasis mine]:

For many expatriate workers in Dubai it was the ultimate symbol of their tax-free wealth: a luxurious car that few could have afforded on the money they earned at home. Now, faced with crippling debts as a result of their high living and Dubai’s fading fortunes, many expatriates are abandoning their cars at the airport and fleeing home rather than risk jail for defaulting on loans.

Police have found more than 3,000 cars outside Dubai’s international airport in recent months. Most of the cars – four-wheel drives, saloons and “a few” Mercedes – had keys left in the ignition.

Some had used-to-the-limit credit cards in the glove box. Others had notes of apology attached to the windscreen.

When the market collapsed and the emirate’s once-booming economy started to slow down, many expatriates were left owning several homes and unable to pay the mortgages without credit.

“There were a lot of people living the high life, investing in real estate and a lifestyle they couldn’t afford,” one senior banker said.

Under Sharia, which prevails in Dubai, the punishment for defaulting on a debt is severe. Bouncing a check, for example, is punishable with jail. Those who flee the emirate are known as skips.

The abandoned cars underscore a worrying trend. Five years ago the Emir, Sheikh Mohammed bin Rashid Al Maktoum, embarked on an ambitious plan to transform Dubai into a hub for business and tourism. A building boom fuelled double-digit growth, with thousands of Westerners arriving every day, eager to cash in on the emirate’s promise of easy living and wealth.

Many Westerners invested in Dubai’s skyrocketing real estate market, buying and reselling homes before building was even complete. But, as the recession took effect, property and financial companies made thousands of workers redundant and banks tightened lending. Construction companies have delayed or cancelled projects and tourism is slowing.

There are increasing signs that the foreigners who once flocked to Dubai are leaving. “There is no way of tracking actual numbers, but the anecdotal evidence is overwhelming. Dubai is emptying out,” said a Western diplomat.
[...]
Most of the emirate’s banks are not affiliated with British financial institutions, so those who flee do not have to worry about creditors. Their abandoned cars are eventually sold off by the banks at weekly auctions. Those recently advertised include BMWs, Porsches and Mercedes.
[...]
Police have issued warrants against owners of the deserted cars. Those who return risk arrest at the airport.

3.62 million expatriates in Dubai
864,000 nationals
8% population decline predicted this year, as expatriates leave
1,500 visas cancelled every day in Dubai
62% of homes occupied by expatriates
60% fall in property values predicted
50% slump in the price of luxury apartments on Palm Jumeirah
25% reduction in luxury spending among UAE expatriates
Sources: arabbusiness.com ; Times database

More useful information in this Bloomberg report:

Feb. 6 (Bloomberg) -- As construction cranes littering Dubai’s skyline go idle, it’s time to revisit that ever intriguing economic indicator: the Skyscraper Curse.

As this columnist has pointed out periodically, there’s an uncanny, if unscientific, correlation between financial crises and efforts to build the world’s tallest building. Look no further than Kuala Lumpur in 1997, Chicago in 1974, New York in 1930 and in biblical times with the Tower of Babel.

The human propensity for architectural overreach has been a surprisingly reliable omen. It’s not a stretch to think of such projects as visual punctuation marks. A giant billboard made of steel, glass, concrete and money. A common thread between skyscrapers and economic disasters has to be easy credit, which fuels irrational growth, valuations, and hubris.

The gleaming Burj Dubai, as fate would have it, recently overtook Taipei 101 as the tallest building at 818 meters (2,684 feet). Right on cue, Dubai’s economy is looking unthinkably shaky.

A year ago, with oil prices heading toward $200 a barrel, few dared question property prices in the United Arab Emirates. Now, there is evidence they “fell off a cliff” as banks reduced lending and speculators withdrew amid the worsening global crisis, Mai Attia, a Morgan Stanley analyst based in the sheikdom, said in a Jan. 30 report.

Strong language, and yet it’s a reminder of how far and wide a credit crisis that began in the U.S. is traveling. China, that other supposed juggernaut, is looking shaky, too. Japan is back in recession, while Singapore seems to have fallen off the same cliff as the U.A.E.’s asset markets.

Thanks to deteriorating economic conditions, job cuts and the unavailability of mortgages, Dubai property prices are down 25 percent from the market peak in September, Morgan Stanley said.

The implications of that will travel the globe. Take the Philippines, where money sent home from overseas workers in booming economies such as Dubai’s are taking a hit. Remittances make up about 10 percent of the Philippine economy, fueling purchases of homes and cars in a nation where private consumption accounts for about two-thirds of gross domestic product. That support is now questionable.

It’s easy now to look back and say we should have seen this coming. Some did, of course. After a Dubai visit in late 2006, Claudia Zeisberger [...] told me: “All the building going on made me feel like I was experiencing the last days of ancient Rome.”
[...]
Few seriously doubt Dubai is a development miracle. Yet it’s fair to wonder if it’s the epicenter of an Arabian asset bubble tied largely to surging energy prices. With crude oil now around $35, fortunes are shifting. Construction booms should have been a harbinger of trouble.

Where else should we be looking? Well, China. Of the 10 tallest high-rise buildings listed by Darmstadt, Germany-based Emporis Buildings, five are in the third-biggest economy and one is in its special administrative region, Hong Kong. Of the 20 tallest, nine are in mainland China or Hong Kong.

Hong Kong is already in recession and China may be heading that way. For a nation at China’s level of development, growth below 6 percent is arguably a recession and anything below 5 percent is crisis territory.

What skyscrapers say about China is investor overreach. The conventional wisdom was that China could grow 10 percent indefinitely. That view meant the numerous mini-Manhattans popping up around the nation were a logical extension of its potential. Or was it merely a textbook case of an easy-credit- driven boom going bust?

Russia may avoid a meltdown, meanwhile, thanks to billionaire Chalva Tchigirinski. In November, Tchigirinski halted construction on the Russia Tower, which would have been Europe’s tallest. Ditto for the U.S., where Donald Trump reined in his ambitions to erect America’s tallest building. His Trump International Hotel is the world’s 11th-tallest high rise.

The Skyscraper Curse may be nothing more than a whimsical exercise to entertain, not inform. Then again, it’s proving to have some pretty solid foundations as an economic barometer.

This report was by William Pesek who has also written on Bloomberg about the Skyscraper Curse before in December 2006 and in November 2007 which share a common base but are still worth having a read.

[Update] An interesting video on YouTube from a German TV report about the collapse of the real estate. I am wondering if I should hope for this guy who still wants to go on with his "Michael Schumacher" luxury tower to really make it to the construction or not, because if he does build it without selling them beforehand, I am 99% sure he's going to be bankrupt before the construction is over.

[Update 20110208] For an in depth analysis and discussion about the Skyscraper Curve, please read this post.