Is Dubai the First Casualty of the Oil Price Drop?

Bloomberg is reporting:

Real-estate values surged fourfold over the past five years, fueled by a supply shortage and an influx of expatriates. Rising commodities prices drove inflation, which accelerated to a record 11.1 percent in the U.A.E. last year. Dubai opened its property market to foreign investment in 2002.

Borrowers tapped mortgages for as much as 90 percent of a property’s value to buy homes on the manmade fronds of the Palm Jumeirah and villas with gardens or golf-course views in developments such as Emirates Hills, The Springs and The Lakes.

Now the credit crunch is coming to Dubai. It’s being aggravated by oil prices that have tumbled 68 percent since reaching a record $147.27 a barrel on July 11. . . .

Artur Khayrullin moved to Dubai three years ago to escape the Russian winter and invest in the booming real-estate market. Now he’s being forced to sell four apartments to raise cash for his family business in Moscow. They have been on the market for two months.

“With all this oil money in the region, I thought the Dubai property market would be secure from the global problems,” the 30-year-old Bentley owner said, reached on his mobile phone on the beach. Now, “nobody is getting financing.”

The worst may be yet to come as a glut of properties arrives on the market.

http://www.bloomberg.com/apps/news?pid=20601109&sid=a2jrSPqYhVzY&refer=home

COMMENT: This appears to be the beginning of what Lindsey Williams was reporting--the bankruptcy of the oil-producing countries. The oil executive told Lindsey last June 9th that the big oil companies were going to drop the price of oil to $50 a barrel as an economic war tactic to bankrupt these countries. Dubai's real estate problems, according to the article above, began in September, just a month or two after the oil prices began to drop.

These things take time to develop, of course, and not all countries will run out of cash at the same time. They will do what they can to prop up their economies, of course--just like America is doing--but unless the price of oil rises dramatically again, they will continue to be in trouble.