Why Dubai should matter to you: U.S. real estate could take big hit
Filed under: Real Estate, Recession, Investing, Mortgages
Funny thing this globalization: Just when you think everything is starting to settle down and maybe, just maybe, the world's economic plight is finally on the mend, along comes news from a place such as Dubai that threatens to send everything into a tailspin all over again.
Stock markets have already felt the shock waves from the news that Dubai's state-owned investment arm--Dubai World--needs to restructure its debt...a fancy way of saying, it simply can't pay its bills. Bills, by the way, that come to some $59 billion. And, there is no app to download that can easily fix that!
But, as Reuters reports, the bigger worry now is what Dubai's debt might do to the property market in the United States where commercial real estate is already on shaky ground, right alongside residential real estate, in most parts of the country.
Following news of Dubai's economic woes Friday, the Dow Jones U.S. Real Estate Index nosedived by 2.9%--or as Reuters correctly reports, "nearly twice the decline of broader U.S. market indexes."
And, it is easy to see why: Dubai World has a big stake, along with MGM Mirage, in the huge Vegas CityCenter project. An arm of Dubai World also has substantial investments in everything from the Mandarin Oriental and W hotels to the newly re-opened Fontainebleau in Miami Beach.
Says Sam Chandan, the chief economist at Real Estate Econometrics in New York, and quoted by Reuters, "It has the potential to spill over into the broader perception of real estate development and real estate as being a very risky area for exposure."
This could have the effect of driving real estate prices down more than they have been already.
Unfortunately for the fledgling, and still unproven, world economic recovery, what happens in Dubai doesn't stay in Dubai!
Charles Feldman is a journalist and media consultant and co-author of the book, "No Time To Think, The Menace of Media Speed and the 24-hour News Cycle."
Reader Comments (Page 1 of 5)
11-29-2009 @ 9:18PM
kathy said...
SO THEY Are still controlling the world...its hard to believe that all the billions made from oil that they didnt put some away for a rainy day....i am sure on a personal basis none will hurt and whos to say they just have been giving more of a share to the terrorists...after all...they do want to own it all....those who dont have a job. are losing their homes...and cars...really dont care anymore about the economy....they are done...and a new economy wont bring it all back...the ones worried now are the ones with the money....how can they hold on to what they have..? how can they get it to make more without them working? what happens when their money is gone? (well we know we will all have to pay make up taxes and the public option tax) what happens if all the world is broke....???anyone????
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11-30-2009 @ 12:05AM
Jeff said...
Scary isn't it.. Has anyone ever mentioned nationalizing our country like Mexico did. It would give us a fresh start. If I was in charge and Im not. Our country is being lead by folk smarter and better educated than yours truly.. However we did take it in the shorts with the oil gouging now lets turn the taking into giving. Borrow borrow borrow and then nationalize.
11-30-2009 @ 1:45AM
Jane said...
You keep saying 'THEY'. Who are you talking about? What is Dubai??? Never heard of it!
11-30-2009 @ 2:14AM
Lin said...
Kathy, Dubai is not a major oil producing Emerit. My son has been there. You do not see oil drilling. You see opulance beyond belief. The world's tallest building, which is a hotel. You cannot even enter the lobby with forking over money. Let's not even chat about their man-made marina! This is a place for the super-rich.
11-30-2009 @ 3:50AM
Hector said...
Dubai has no oil. Many thing that is just them there in Dubai people but is also many from here and also Europe including England, China and Russia. Is not only Arabs in Dubai people. Who do you think built the buildings of Dubai? Do you think it was the Arabs? It was not only the Arabs but it was London, USA, China and some of our so called exclusive money hungry business people.
11-30-2009 @ 7:53AM
The Big Guy said...
To answer you question. World war will be first, with no real winners. Those of us who can hunt and farm will have it easier than those who can't. Lot's of people will die, but that's not really a bad thing. The world is over populated. The only real wealth are the things that matter. Food/Shealter and protect those thing from invaders. Like minded people will band together to do just that. So load up on guns, ammo and learn how to make booby traps. It may be the only thing we have if the world goes broke.
11-30-2009 @ 8:44AM
Pedro Carposanista said...
To Jeff above...You should sell everything and pack up and buy a nice little house in Mexico. Hasta Lavista Baby. Don't let the gate at the small still much unfinished fence on the Rio Grande hit you in the azz.
11-29-2009 @ 9:22PM
Dave said...
Our real estate has already taken a big hit. The gold sheik of Dubai will purchase the US only for the bail out price. Folks we have had enough. This is the USA not some country that only exists in your mind. We need to sever all ties with every country return all of our DOD personnel back to the USA and close our boarders to all. If we don't then we will loose everything we have. This world is on the verge of disaster, all it will take is one more straw to break it. The rich and greedy will win and will we loose. If this is what we want then sit back and watch it happen.
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11-30-2009 @ 8:38AM
cueb5 said...
I totally agree with your comments. Don't want to sit back,but where do we go from TEA PARTIES. Things need to get bigger. WE THE PEOPLE need to organize.What can we do.I feel we need plans soon!!!!!!!!
11-30-2009 @ 2:22AM
Janet Leland said...
Dave, I agree with you and so did George Washington when he said that we should stay out of foreign affairs.
11-29-2009 @ 9:32PM
mike said...
A thought just crossed my mind....What if..What if it all does fall ?
What would be so bad about letting it all fall down..and then start over ? When I was a kid my brother and I were working on a "log" house and it didnt fit together right. My Dad came into the room and said we needed to take it all apart and start all over again and put it together the right way....hmmmmm.
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11-30-2009 @ 10:26AM
jim said...
You are RIGHT ON!!! IMPEACH this SOCIALIST IMPOSTER and KICK all of his LIB DEM CRONIES OUT NOW to stop their DAILY DESTRUCTION of our country!!!
WAKE UP AMERICA!!
11-29-2009 @ 9:39PM
mike said...
Lets face it people, We are definitley going the wrong way. How do I know ? Because it seems every time we take a step towards the "solution" THINGS GET WORSE ! I never even heard of "Dubai" until a few days a go. and now I understand this will have an effect that will make matters worse ! Whats with that ?
If my life is that fragile then I say "bring it on and be done with it"
I will survive and so will all of you....
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11-30-2009 @ 11:09AM
lionel said...
OUR CORRUPT SCUMBAGS IN WASHINGTON ARE ALLOWING THE MIDDLE EASTERNERS TO WRECK THE WORLD ECONOMY WHILE THEY ALL ROB US BLIND !
11-29-2009 @ 9:55PM
rose said...
Dubai.....well, I can see why they have to restructure their debt. Building entire islands shaped like palm trees and the world map where none existed before, and an entire indoor ski resort. I would say that might be spending beyond your means!
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11-29-2009 @ 9:57PM
ibstilyn said...
Dubai has no oil--they produce nothing..it's a mirage state where the wealthy ex-patriates of various countries go when the spoiled brats don't want to pay their taxes--it's a criminal tax haven..sand is dredged out of the ocean and piled up--they then build beachfront condos for the wealthy phucks. That's where Halliburton setup shop to avoid paying taxes like the criminal organization they are. hey--charge US $75 for a chesseburger to a soldier on a no-bid contract. Electrocute a few more in improperly wired barrack showers and take the money and run. That's the legacy of Bush & Cheney. This is what happens to every country that DOESN'T tax their people--it's unsustainable. Bush's tax cuts for the wealthy nearly destroyed this country. Deregulation almost finished the job when the repealed the Glass -Steagal act. The Germans have a healthier attitude towards the wealthy--who did they exploit to get there...? "Pull themselves up by their bootstraps my @$$"
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11-29-2009 @ 10:34PM
ADMR said...
$75 Bucks 4 a Cheeseburger - Oh those WEALTHY Phucks - lol
12-01-2009 @ 9:08AM
steve said...
Excellent response about the fact that Dubai is more of a Las Vegas of the Middle East rather than the Detroit or Houston of that part of the world. I'm not sure we want to go the German route, but you were spot on about Haliburton being a criminal entity that screwed America and its soldiers while waving the flag and pretending to be patriotic, and also about the fact of the mirage that Dubai has turned out to be. Too bad everything turned out so bad, but that's what happens when you put "entitled" executives in charge of things.
11-29-2009 @ 10:03PM
Sonja said...
It's no wonder Dubai is in trouble. They went absolutely nuts building huge buildings, hotels, islands full of houses, etc., etc. like there was no tomorrow. I'd always thought I'd like to go there because it would be like going into the future - like a world's fair! They went absolutely crazy spending and now we see they were spending here, too. It will be interesting to see what happens. I read where Abu Dabi, another state of the United Arab Emarites might bale them out.
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11-29-2009 @ 10:05PM
KC said...
This did not happen overnight - Dubai is the tiniest country in the middle east, situated in the most dangerous, war-torn region. For years, Dubai has had the highest concentration of BILLIONIARES and most highly educated people running their country. There are no sales or income taxes, and foreign businesses are invited to set up operations without any constraints as an incentive to promote foreign business networking. Obviously, something caved in on them due to bad deals and investments that did not pan out.
I live in Las Vegas, and although the City Center may look impressive on TV, it is a hideous monstrosity that blocks out the sun in real life. It is comprised of several casinos, high-rise luxury condos, and micro-villages that are being forced to open at pre-scheduled dates, whether they are ready or not. In spite of the fact that MGM Mirage is barely making their obligations on their loans, they have hired at least 3000 employees, many of who will probably be laid off after the first quarter.
I don't hold grudge against anyone who becomes wealthy through their own hard work and a decent set of ethics. But to those who have pocketed thousands in bonuses at the expense of others through shady business practices, Dubai has a room for you at the Hilton.
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