The city of Dubai is one of the most modern cities anywhere in the world and yet, it is also built on borrowed money from Swiss banks. As you may or may not know, the banking crisis that occurred in the United States had huge rippling effects around the world.
This is because many foreign banks bought the mortgage loan bundles for investment. These loan bundles were inaccurately rated and thus, insured, and all those banks that participated in what appeared to be a solid investment are now paying a huge price.
With the near collapse of the Swiss banks, the question is will they still be able to give loans to the government there and the construction companies operating in Dubai? That is some of the most expensive real estate on the planet. Those buildings are beautiful, but are they are good collapse due to this banking crisis.
For far too long the promoters of Dubai have shown the excess of greed and the carefree spending of oil monies that collateralized these huge loans from Swiss banks. Now with oil prices down below $70 per barrel and headed towards $50 per barrel, one has to ask if they will be able to service the debt from the Swiss banks that has already been borrowed.
Not to mention the fact that the Swiss banks may not be willing to lend any more money and there are huge projects with gigantic skyscrapers that are half built and waiting for further funding to complete the projects. Not many are talking about the full problems of a financial and real estate collapse in Dubai, but those that are, indeed, are quite worried, as well they should.
It is not my intention to be the purveyor of bad news and please do not shoot the messenger, but we should all realize that the lavish and irrational spending can never last forever. There will always be a reality check, there always is and Dubai is no exception. Please consider this and the irresponsibility of the Dubai real estate bubble.