Dubai Prime Property Values Approach Floor, BofA Says

By Camilla Hall

May 17 (Bloomberg) -- Property prices in centrally located areas in Dubai may be reaching a “floor” after values dropped by 45 percent, Bank of America Merrill Lynch said.

“We see an emerging floor for prime assets, particularly in the retail sector, which has the smallest supply pipeline,” Dubai-based analysts including Karthik Sankaran and Abdelrali El Jattari wrote in a note to investors today. Growth in retail, trade and tourism should resume, helping the real-estate industry, the analysts said.

Dubai property projects stalled after the global credit crisis pushed up the cost of financing, prices plummeted and buyers defaulted on payments. The market’s collapse followed a construction boom that created thousands of homes just as demand began to evaporate. Average residential prices across the emirate may fall a further 15 percent this year, according to the bank.

Abu Dhabi-based Aldar Properties PJSC is the Bank of Americai Merrill Lynch’s “preferred developer” because “substantial negativity is priced in.” The analysts reinstated coverage of Emaar Properties PJSC, which opened the largest skyscraper this year in Dubai, giving the company a “neutral rating” and a 12-month share price target of 4.4 dirhams. Emaar closed at 3.75 dirhams yesterday and Aldar at 3.77 dirhams.

Migration within the United Arab Emirates will support established residential locations, though that isn’t a “panacea,” the analysts said. Dubai would have 44,000 vacancies this year “even if all qualifying expats from Abu Dhabi and Sharjah relocated to Dubai tomorrow.”

The completion of a “significant” number of new homes in Dubai later this year will put pressure on prices after they rose 2 percent in the first quarter, Colliers International said in a May 9 report.

Nakheel PJSC, the Dubai World-owned property company seeking to restructure $10.5 billion of debt, restarted work on projects that have been put on hold, Al Bayan reported today, citing people it did not identify.

Dubai - The Vulnerability of Success

"This is the best study of Dubai that I have read and an important contribution to the still meager literature on the extraordinary formation that is the United Arab Emirates. Especially interesting is the book's discussion of the emirates' founding under British rule and the continuing influence of this imperial history on its politics and society; the imported character of its 'Arab' identity; and the regional context that informs everything from security concerns to demography." -- Faisal Devji, St. Antony's College, University of Oxford, and author of Landscapes of the Jihad: Militancy, Morality, Modernity


"Davidson traces Dubai's rise from sleepy Gulf port to player on the world scene." -- Christopher Hawthorne, Los Angeles Times


"Mr. Davidson nicely lays out this flashy emirate's astonishing ascent from tiny fishing and pearling village to global hub." -- New York Times


"Davidson offers a detailed historical and topical study of the Dubai phenomenon." -- Foreign Affairs


"Davidson gives an excellent overview of Dubai, the UAE in general, and its path to economic development... Recommended." -- Choice
Get this book now at AMAZON - Dubai: The Vulnerability of Success 

Dubai Houses Prices - May Update

May 9 (Bloomberg) -- The completion of a “significant” number of new homes in Dubai later year will further pressure prices that rose 2 percent in the first quarter, Colliers International said.

Colliers, a global real-estate-services firm, estimates that 41,000 residential units will enter the market by the end of 2010, mostly in the low- to mid-income segments. House prices in the first quarter were on par with 2007 levels, rising on average to 1,061 dirhams ($289) a square foot from 1,037 dirhams a year earlier, Colliers said in an e-mailed report today.

“There will be significant oversupply in the market by the end of the year, so it is anticipated the index will experience fluctuations in value going forward,” Colliers’ regional Director Ian Albert said in the report. “Demand is not expected to match the growth in supply, creating downward pressure on property prices,” according to the document.

Dubai’s property prices have slumped more than 50 percent since their peak in mid-2008 as the financial crisis forced companies to dismiss workers. The market’s collapse followed a construction boom that created thousands of homes just as demand began to evaporate.

Apartment prices in the emirate gained 6 percent in the first quarter compared with the previous three months and villa prices rose 2 percent while the cost of townhouses was down 4 percent, Colliers’ house-price index showed.

Banks ‘Selective’

“Numerous” banks and mortgage providers increased the loan-to-value ratio to between 75 percent and 90 percent in the first quarter, according to Colliers. Some also lowered interest rates on mortgages to between 6.5 percent and 8.5 percent.

“Banks remain selective in offering finance, providing it against specific projects, mainly completed or near completion, and only to borrowers who can meet the strict lending criteria adopted by most banks,” Colliers said in the report.

The change of demand from speculative investors to end- users places more importance on the “liveability” aspect and there will be better demand and greater stability for projects that offer a “community lifestyle,” according to the report.

Rework

"If given a choice between investing in someone who has read REWORK or has an MBA, I'm investing in REWORK every time. This is a must read for every entrepreneur."
--Mark Cuban, co-founder of HDNet and Broadcast.com and owner of the Dallas Mavericks

Crash Proof 2.0: How to Profit From the Economic Collapse

If you have not heard the name of Peter Schiff, you are missing a lot. This is a great economic adviser (I do not want to use the word guru...) - and he explains complex things using very simple terms and definitions.

I absolutely love Peter Schiff. He's astute, sound financial mind, and always right on. "Crash Proof" was written before the crash and Peter had explained exactly how the bubble was blowing up and how it was inevitably was going to burst, which it did. The updated version brings us into the modern age of disgusting deficits, unacceptable government spending, and horrendous regulation into the free market. Schiff predicts that government isn't making things better with all this additional spending and intrusion into the market and that we're not out of the woods--as some people are claiming--and that it's actually making things worse. He concludes with his solid foreign currency assets and commodities-centered investment strategies that will help you avoid the next crash (and the coming collapse of the dollar). If you had taken his advice in 2006, you'd be much better off today.

Dubai: The Vulnerability of Success

This is the best study of Dubai that I have read and an important contribution to the still meager literature on the extraordinary formation that is the United Arab Emirates. Especially interesting is the book's discussion of the emirates' founding under British rule and the continuing influence of this imperial history on its politics and society; the imported character of its 'Arab' identity; and the regional context that informs everything from security concerns to demography...

2010 - a good year for Dubai properties and real estate

The prices of real estate in Dubai are returning to pre-crisis levels and indicates a very good year for real estate investments in 2010, claims a leading industry report.

The worst part of the economic meltdown is generally believed to be over, and investors are full of cheer and looking forward to 2010.

Most of the investors in 2010 will be those who ensure that their assets are realistically priced, professionally managed, and will offer long-term stable liquidity, said a recent report by Jones LangLa Salle.

The MENA region was the last to feel the pinch of global economic meltdown, with property prices falling up to 50 percent in few areas in the past year, but, its real estate market was the fastest to cope with the economic crunch.

With the financial pressures beginning to ease, the sale activity is likely to pick-up marginally in 2010 and this will a psychological boost for investors, thereby increasing market confidence. The investors with sufficient cash too invest will benefit immensely, with the low sale prices, almost equivalent to the 2006 levels, said Matthew Green, Head of Research and Consultancy, CB Richard Ellis.

The report mentions that investors are now happier with the state-of-the-market during recent months. This sunny optimism is primarily driven by the overall economic strength derived by hydrocarbon-based economies.

Qatar, Saudi Arabia and Abu Dhabi property markets will be among the first to recover in the region, with stronger economic fundamentals and government initiatives. These markets will see greater increase in performance and pricing during the coming year.

Dubai, in particular, is likely to grow at a steady pace of four to six percent per year until 2015. Investors are considering Dubai to be the regional leader in terms of city competitiveness and real estate infrastructure, says Brendan Coakley, Managing Director at Chesterton International.

The success of Dubai in the past comes largely from its name being built as a city with good infrastructure. However, concerns still remain about the availability of capital for real estate purposes and supply-demand dynamics. The lack of liquidity and resentment on the part of few financial institutions to resume lending is proving to be a barrier for the Dubai Market.

However, taking into account the huge volume of new stock either completed or in pipeline, and combined with minimal levels of demand, the supply-demand imbalance is the main issue for the future recovery of the market, Green said.

Therefore, in future, there is increased need transparency and honesty on the part of developers, brokers and investors themselves.

Burj dubai , burj khalifa live video opening ceremony

This is a live video from the opening ceremony of Burj Dubai (or Burj Khalifa as it is called now) - this is a ust to watch this week.

Burj Dubai / Khalifa - The World's Tallest Skyscraper - Dubai, United Arab Emirates
828 m | 2716 feet

Burj Dubai is now Burj Khalifa

Dubai’s Sheikh Mohammed bin Rashid Al Maktoum opened the world’s tallest tower today and renamed it after the ruler of neighboring Abu Dhabi, which bailed out Dubai during the country’s debt crisis last year.

The 200-story Burj Khalifa cost $1.5 billion to build, said Mohammed Alabbar, chairman of developer Emaar Properties PJSC. The tower takes it name from Sheikh Khalifa Bin Zayed Al Nahyan, who is also president of the United Arab Emirates. While mainly residential, the building will have 37 floors of office and retail space.

During the five years of the tower’s construction the sheikhdom’s debt-fueled property market went from the world’s best performing to the worst, forcing officials to renegotiate loans and seek bailouts from Abu Dhabi. The Burj’s occupancy rate may reach 75 percent this year, with office leasing proving the biggest challenge for investors, said Roy Cherry, an analyst at investment bank Shuaa Capital PSC.

“Those who bought with the intention of leasing will face a difficult time because few companies today can justify paying premiums for luxury,” Cherry said.

Burj Khalifa has a height of 828 meters (2,717 feet), Alabbar said in a telephone interview today. Apartment prices in the tower, formerly known as Burj Dubai, have fallen to less than half of the 10,000 dirhams ($2,700) a square foot that they reached at the 2008 peak.

Burj Dubai -World's tallest building

The 828 metre (2,717 ft) supertall skyscraper in Dubai, United Arab Emirates, is being opened with much fanfare despite the doom and gloom that has surrounded the emirate's economy in recent weeks.

Crews of cleaners today rushed to finalise preparations for the grand inauguration of the Burj Dubai, the tallest building in the world. With batteries of fireworks and an invited crowd of 6,000 guests, the rulers of the Gulf emirate will tonight attempt to convince the world that their financial troubles have been overstated with a lavish celebration of a glass and steel building that tapers almost a kilometre into the sky.

Dubai's ruler, Sheikh Mohammed bin Rashid al-Maktoum, is expected to make a triumphal ascent of the spire-shaped tower which rises over 800m from the Arabian desert. He will announce the exact height this evening in a move intended to draw a line under the country's financial crisis, which has left a trail of outstanding creditors.

"Crises come and go, and cities move on," said Mohamed Alabbar, chairman of Emaar Properties, the state-owned developer of the building. "You have to move on. Because if you stop taking decisions, you stop growing."

With swimming pools on floors 43 and 76 and plans for the world's highest mosque on the 158th floor, the $1bn "superscraper" dwarfs both the world's previous tallest building, the 508m tall tower 101 in Taipei, and the 629m KVLY-TV mast in North Dakota, the tallest man-made structure. It is so high, the temperature is said to be 10C cooler at the zenith than at the base.

But with many investors in the building's 1,044 apartments already facing losses after property prices in Dubai slumped, the Burj's owners are struggling to present their architectural achievement as anything but a pyrrhic victory. The offices and most of the flats are still an estimated two months from completion and the emirate's neighbours in Saudi Arabia and Abu Dhabi, which provided Dubai with a £15bn bailout last year, are also understood to be unimpressed at the ostentation of the building.

The fountain outside cost a reported £133m and the 160 room hotel was designed by fashion designer Georgio Armani and boasts a nightclub, two restaurants and a spa. Meanwhile, labourers on the project, including many immigrants from Pakistan, India and Bangladesh, earned low wages. Skilled carpenters took home just £4.34 a day and labourers, £2.84.

Security is expected to be tight. Local newspapers quoted Major General Mohammed Eid al-Mansouri, head of the protective security and emergency unit for Dubai police, saying more than 1,000 security personnel, including plainclothes police and sharpshooters, will be deployed to secure the site for the opening.

But even by the standards of an emirate which has created miles more beach front by building vast islands from millions of tonnes of sand in the shapes of palms, the tower stands out as Dubai's most remarkable achievement. Around 12,000 people are expected to live and work in the tower which is part of a 500-acre development known as "downtown" Burj Dubai.

Alabbar said Burj Dubai was "another demonstration of Dubai's ability to achieve what few people thought possible".

"The tower is a global icon," he said. "It represents the determination and optimism of Dubai as a truly world city. It is a powerful symbol for the entire Arab world."

Dubai World - what was built with borrowed money

Are you wondering where 60 bn borrowed by Dubai World was spent?
Here is a video that will show you the bright ideas that have been turned into real things by Dubia World.

Dubai crisis - a person at a glance

Typical was the case of British developer Arthur Fitzwilliam, an affable 58-year-old polo fan from London. He had lived in Dubai for two decades, dabbling in real estate and other ventures. In 2004, he inked a deal to develop a 14.5 million-square-foot plot of desert acquired from a government-controlled company.

The Plantation Equestrian and Polo Club would have air-conditioned stables for 800 horses, four polo fields, facilities to host horse shows and a five-star hotel. Mr. Fitzwilliam sought partners to help finance the project. A British banker agreed to provide financing, in exchange for a 30% stake, Mr. Fitzwilliam said in an interview.

But in June 2008, authorities detained Mr. Fitzwilliam, the banker and one other. Then in September, Dubai Islamic Bank, or DIB, foreclosed on the land for the project. It also seized more than 100 polo ponies, Mr. Fitzwilliam said. For almost a year, he sat in jail before charges were filed. In March 2009, authorities charged seven men with scheming to defraud DIB, according to a bill of indictment filed by Dubai's public prosecutors. Mr. Fitzwilliam was accused of aiding the scheme.

Last month, he was transferred to a Dubai hospital to undergo tests for cancer. Four Dubai police officers stood guard outside his room.

Mr. Fitzwilliam denied any wrongdoing, as did the British banker he was working with. "I want a fair trial, and I'm prepared to go with the system," he says, shackled to his hospital bed. "Anyone who knows the case knows I'm not guilty."

A spokesman for the Dubai prosecutor's office didn't respond to requests for comment.

Amid the uncertainty surrounding the arrests, the crisis roiling the rest of the world was catching up with Dubai. When global credit markets froze up in late 2008, international investors stopped buying Dubai property. Some who had already bought stopped making installment payments. Nakheel and others shed staff and scrapped or delayed dozens of projects.

Last February, the troubles touched Ms. Chana's plan for a new home in Dubai. Nakheel halted work on the Palm Jebel Ali. Though dredging had been done, little construction had.

Ms. Chana says she has sunk about $550,000 into her still-unfinished home. Earlier this year, she flew to Dubai to try to salvage the investment. She is living in a hotel-apartment with her daughter, helping to organize other investors and petition Nakheel for rebates. "I just won't let this drop," she says. "It's become my obsession."

In October, Nakheel proposed that Jebel Ali investors transfer their contracts to property elsewhere that is already finished or close to it.

Simon Murphy bought a $240,000 ground-floor apartment in the Palm Jumeirah in 2002 and moved in five years later. He is now a "resident representative" to Nakheel, like being part of a homeowners board. He says that in recent weeks, Nakheel has cut back on maintenance, including tree trimming.

Since Dubai's debt-standstill announcement, Mr. Murphy says, many apartment residents have stopped paying management fees, typically around $700 a month. Nakheel declined to comment. "Most people fear that their money will go into the bottomless pit of Nakheel debt," Mr. Murphy says.

Freehold definition is under scrutiny in Dubai - Jumeirah Lake Towers is the first

The Dubai Municipality's latest statement regarding the free-zone status of Jumeirah Lake Towers (JLT) has marred the hopes of several thousands of residents who were under the hope of gaining housing fee exemptions.

According to an official at the Municipality, the status of JLT needs to be clarified by a decree, and that free zone claims by a developer does not imply exemption of housing fee for its residents.

The Head of Housing Fee Section at the Dubai Municipality, Abdullah Hashim, confirmed that JLT is not officially a free zone.

The residents of towers in the 'mini-Manhattan' around the man-made lakes by Nakheel have been questioning about housing fee exemption to the developer.

"Although several areas have been claimed to be free zones, they are not free zones. Media reports had stated that the free zone areas are exempt from housing fee, and JLT has been wrongly named as a free zone. But, we never said that, and this has created lot of confusion. None of the buildings there are considered to be part of a free zone," Hashim said.

He added that municipality is however, waiting for a list which could clearly stipulate the areas designated as free zones. The concerned authorities are likely to come up with such a list shortly.

Dubai Shows What A Property Plunge Really Looks Like

Here's essentially what caused Dubai's debt extravaganza to finally come to an end.

Far too much easy money flowed into Dubai during previous years, fueling a massive construction boom financed with debt. For awhile this debt looked sustainable to those involved because it was ostensibly backed by valuable property.

Yet when the global financial crisis hit, property prices fell in many parts of the world. Dubai property prices were hit especially hard.

As shown below by the skiing Emirati, Dubai property rates per square foot fell 45% from Q3 2008 to Q3 2009 according to Colliers International.

Thus just as many American's went underwater on their mortgages due to the American property crisis, owing more to the bank than their house was worth, the same thing basically happened to the Nakheel property business of the Dubai state-owned conglomerate Dubai World.

Combined with near-term cash flow constraints, this finally forced Dubai World to admit to its creditors that it would not be able to meet all of its debt obligations.

Dubai's property market could plummet by up to 30 per cent from current levels - already down 50 per cent from peak - and may take more than a decade to recover

Dubai government washes its hands of $59bn debt built up by Dubai World

The Dubai government refused to guarantee the huge debts built up by its conglomerate Dubai World, dashing investor hopes that the latest episode in the global financial crisis might be swiftly resolved.

The comments were made as the region reopened for business after the Eid holiday and local stock markets fell sharply.

Creditors, including several British banks, had been eagerly awaiting some clarification from Dubai officials since the brief announcement ahead of the long weekend on Wednesday night that Dubai World was seeking to defer repayments on its $59bn (£36bn) debt pile, but there was no comfort on offer. British banks have a $50bn exposure to the United Arab Emirates and high street names including Lloyds, HSBC and Royal Bank of Scotland have formed a creditors' committee seeking urgent meetings with Dubai officials.

In an interview on local television, the director general of Dubai's department of finance, Abdulrahman al-Saleh, appeared to suggest that investors only had themselves to blame for the unfolding crisis. "Creditors need to take part of the responsibility for their decision to lend to the companies," he said.

"They think Dubai World is part of the government, which is not correct. Dubai World was established as an independent company; it is true that the government is the owner, but given that the company has various activities and is exposed to various types of risks, the decision, since its establishment, has been that the company is not guaranteed by the [Dubai] government."

Dubai World is the largest of a handful of state-controlled companies and owns assets such as a profitable ports business that includes the former P&O, the QE2 liner, and the property firm behind some of the more outlandish developments of the last decade.

Fears that it could potentially default on its debts sparked turmoil on world markets at the end of last week and concerns that other heavily indebted states could be affected as investor confidence eroded, with much of the focus on Greece, Ukraine and the Baltic states.

The central bank of the United Arab Emirates yesterday sought to restore some calm by providing an emergency facility to shore up local banks, and foreign banks operating in the Emirates.

The International Monetary Fund today welcomed the move and said it continued to monitor the situation.

Dubai’s $59 Billion Default Sends Tremor Through Global Financial System

Dubai’s announcement on Wednesday that it would be delaying by “at least” six months the maturity date of $59 billion in bonds issued by the city-state’s largest state-owned company, Dubai World, has sent global shares tumbling. The market reaction to Dubai’s massive debt default is partly explained by the exposure of European and Asian banks to DP World and its tourism subsidiary, Nakheel.

The real reason for the falls, however, is that Dubai’s apparent insolvency confirms that default by hyper-indebted government borrowers is now a real risk right across the globe, especially in the Middle East and Eastern Europe. Such a default would not only mean an immediate worsening of the already brutal post-crash conditions suffered by millions of workers in defaulting countries, but would usher in a second, and probably worse, phase in the global financial crisis.

If countries like Dubai begin to fail, who will save them?

As one financial crisis recedes, another may be beginning. In Dubai this week, we've had a foretaste of what may be to come as governments around the globe seek to grapple with the explosive growth of fiscal deficits and public debt.



Like everyone else, my regard for the miracle of Dubai's fast-evolving skyline has always been tempered with a high degree of scepticism. As a monument to the vanity and hubris of Sheikh Mohammed bin Rashid al-Maktoum, Dubai has long looked like an accident waiting to happen. Such has been the pace of development that nobody could have been surprised by the debt default now threatened. Only the assumed support of Dubai's richer neighbour Abu Dhabi, which is now far from certain, has prevented it happening sooner.

Yet the important question for markets today is not whether Dubai and Sheikh Mohammed can survive the sandstorm; in fact, that is almost irrelevant. Dubai's debts of $80 billion (£48 billion) are a tiresome and unwelcome irritant which will cause further write-downs among western banks, but in the scale of things not of great significance: Britain is planning to raise more than three times that amount in the debt markets in this financial year alone.

Rather, the issue is whether this folie de grandeur of a desert kingdom is just an isolated, and therefore containable, incident, or a more worrying outrider for a wider sovereign debt crisis which might eventually engulf major, advanced economies. Everyone thought the financial implosion of the last two years was largely behind us – yet Dubai has reminded us that if nations start defaulting, then it may be about to enter a new and even more frightening phase.

Think of Dubai not so much as the hors d'oeuvre as the pre-dinner canapé, with the starter reserved for larger economies with distressed fiscal positions, such as Greece and Ireland, moving for the main course on to Japan and possibly even Britain and the US.

Already, there are rumblings. The cost of insuring sovereign debt against default has risen across the board, and for countries thought particularly at risk, bond yields are on a firm upward march.

Across the developed world, public debt is set on an explosive course. According to new estimates by Moody's, the credit ratings agency, the total stock of sovereign debt worldwide will have risen by more than 50 per cent between the start of the financial crisis in 2007 and the end of next year, to $15.3 trillion.

But this is just the beginning. On current projections, that total is set to rise by at least a further 50 per cent, before finally peaking in four to five years' time, and then only if governments have by then taken remedial action.

These are uncharted waters, quite without precedent in peacetime. In seeking to address the financial and economic crisis of the past few years, countries have come close to bankrupting themselves. It is as if, in treating the patient, a physician has infected himself with the same deadly disease.

Perhaps oddly, financing these fast-growing deficits has not so far been a problem, at least for the major advanced economies. Risk-averse investors have spurred high demand for sovereign debt, in the possibly misguided belief that there can be no haven safer than assets guaranteed by taxpayers and the ability of their governments to print money.

More perversely still, the crisis in Dubai has caused a renewed flight to the perceived security of G7 government debt. Money is being withdrawn from the periphery and reinvested in US Treasuries, German bunds, and even British gilts.

But if the banking crisis is anything to go by, that's not where the story ends. There, too, the implosion began with smaller, obviously flawed bit-players, who had self-evidently grown too rapidly and overstretched themselves.

Markets dashed to withdraw funding from Northern Rock, but in transferring the money to the likes of the Royal Bank of Scotland found that they had invested only in something even more unstable. The Rock, it turned out, was just an outlier in a systemically unsafe sector.

If Dubai is the sovereign debt equivalent of Northern Rock, then Greece might be its Bear Stearns and Japan its Lehman Brothers. But why stop there? For Citigroup, think the US, and for RBS and HBOS, think Britain. Only there would be no one to bail out their creditors if America or Britain showed signs of defaulting.

Of course, I am exaggerating to make a point. Nobody thinks this a likely outcome, even if it ought to be added that nobody thought the semi-nationalisation of RBS and HBOS remotely likely either. The judgment of the markets is that on present trajectories, the sovereign debt burden is just about manageable. But it's touch and go.

The credit ratings agencies are just itching to downgrade some of the big hitters, alongside the obviously more vulnerable, with Britain and America the first in line. If the markets start to demand a premium for their money, that's going to make the task of economic recovery and fiscal consolidation that much tougher. At the risk of sounding like a scratched record, this crisis is not over yet – not by a long chalk.

Dubai Default - collection of links

No one saw this coming ...

From Bloomberg: Dubai Debt Delay Rattles Confidence in Gulf Borrowers

Dubai is shaking investor confidence across the Persian Gulf after its proposal to delay debt payments risked triggering the biggest sovereign default since Argentina in 2001.
...
Moody’s Investors Service and Standard & Poor’s cut the ratings on state companies yesterday, saying they may consider state-controlled Dubai World’s plan to delay debt payments a default. The sheikhdom, ruled by Sheikh Mohammed Bin Rashid Al Maktoum, borrowed $80 billion in a four-year construction boom ...

And a few articles from the WSJ: Dubai Starts to Untangle Dubai World Fallout

And European Banks Seen Exposed To Dubai World

Most banks on Thursday said their exposure to Dubai and Dubai World is small or declined to comment, but Credit Suisse analysts estimate European banks have about $40 billion in exposure to debt issued by various Dubai city-state entities, including Dubai World.

And from December 2008: Citi Voices Upbeat View on Dubai (ht jb)

With questions about Dubai's looming debt obligations swirling, Citigroup Inc. said it had raised $8 billion for the Persian Gulf city-state over the course of the past year and still had a positive outlook on its economy.

Citigroup Chairman Win Bischoff was quoted in the bank's statement Monday as saying Citigroup continues to see Dubai as among its "most significant markets."

When there are bad loans to be made, apparently Citi never sleeps.

UPDATES: Brad DeLong suggests it might be Time to Reread the History of Austria's Creditanstalt in 1931...

Interesting time. In Europe, the Creditanstalt's bankruptcy and what followed was what turned the recession into the European Great Depression...

And DeLong excerpts from a Financial Times article by Roula Khalaf: The emirate has a lot of explaining to do

And from Izabella Kaminska at the FT Alphaville: Barclays Capital ‘change their view’ on Dubai

My, my, what a difference a few weeks make.

Earlier this month — when all still seemed relatively well in the UAE emirate of Dubai — Barclays Capital was among those touting Dubai-related debt as a decent investment for clients. The bank even confidently predicted the repayment of the now infamous Nakheel sukuk.

In fact on November 4 — the day Moody’s slashed its ratings on five Dubai government related entities — BarCap analysts wrote:

We expect several developments to act as positive catalysts for Dubai’s sovereign spreads. First, the likely repayment of the Nakheel sukuk in December. Second, Dubai’s ability to raise the second USD10bn tranche with the support of Abu Dhabi. Third, a successful conclusion of the merger between Emaar and Dubai Holding, as well as a solution allowing mortgage providers Amlak and Tamweel to resume lending.

On that basis, we recommend a long position in Dubai sovereign credit and see today’s negative price actions as an opportunity to buy.

There is much more at the link.

Dubai default is about to be announced

Dubai Holding credit-default swaps rose to 1,175 basis points from 1,085 basis points, CMA Datavision prices show. CMA started to track Dubai credit swap at the beginning of this year.

Lending and investment banking in the Gulf are declining as oil prices and stock markets in Dubai and Abu Dhabi are hit by the worst global economic slump since the 1930s. Dubai is also bracing for a real-estate slowdown after a five-year boom as banks cut back on mortgage loans and speculators exit the market.

The largest state-owned companies in the United Arab Emirates -- of which Dubai is one of seven sheikhdoms -- have $20 billion of debt due this year, according to a Merrill Lynch & Co. report published in October.

“Will Abu Dhabi’s government, or even the federal government, follow this step by supporting banks in other emirates?” analysts led by Sofia El Boury at Shuaa Capital PSC, the U.A.E.’s biggest investment bank, wrote in a note released today. “At this point, we do not have a clear direction of how things will proceed.”