A monument to the folly of Dubai

A year ago, a world reeling from the financial crisis looked on in amazement as Dubai threw the most expensive launch party on Earth for the opening of the five-star Atlantis Hotel.

Fast forward 12 months and a massive $300bn in planned development projects have been cancelled. The sheikdom, famed for its palm-shaped man-made islands, is floundering under $80bn in debt, and many expatriates have fled leaving a trail of unpaid loans in their wake.

The Burj Dubai - at 818m the tallest building in the world - was scheduled to open in April this year as a symbol of Dubai's achievements.

But although the building now looms over the emirate's chicest development, Downtown Dubai, Burj owners are making quiet murmurs about a possible official opening in December.

This is a far cry from the A-list studded fanfare with which the Atlantis opening was celebrated.

Dubai no longer wants to draw attention to what is now seen as a symbol of excess and all that has gone wrong in the Islamic state, one source said.

Over two decades, Dubai became the land of opportunity, reminiscent of a burgeoning New York, where would-be entrepreneurs arrived from all corners of the globe.

Many became millionaires in a property boom fuelled by cheap debt.

As late as last November, Dubai seemed invincible and recruiters reported a surge in CVs from Western high-flyers keen to find a refuge in the financial storm.

But in a matter of weeks the extent of the fallout from the credit crunch became apparent.

Credit dried up and speculators were left high and dry with vastly overpriced property that they could no longer offload.

Many of the 100,000 British expatriates who had made Dubai their home were made redundant as finance, property and tourism slashed jobs.

As visas are dependant on employment, many had just 30 days to find a new job or leave the country.

Faced with the prospect of debtors' prison, thousands simply dropped off their 4X4s and sports cars at the airport - often with the keys still in the ignition - before heading for home. Parts of Dubai

currently resemble a ghost town with occupancy levels at some luxury developments as low as 50pc.

At night, the most striking views of the skyline reveal a city with many of its buildings only partially lit.

The latest figures from Colliers International, the property consultancy, reveal that residential property prices have slumped by 48pc since last year and are expected to drop a further 20pc as more major projects are completed.

JP Grobbelaar, director of research and advisory at Colliers, said: 'One in every four units is standing empty. Unless there is a dramatic improvement in economic conditions this oversupply will continue for at least the next two to three years.'

Standard & Poor's, the credit ratings agency, said Dubai needs to raise a further $10bn for its economic support fund as it does not have enough capital to prop up its struggling government-controlled companies.

Farouk Soussa, head of Middle East government ratings at S&P, said it will be down to Dubai's oilrich neighbour, Abu Dhabi, the capital of the UAE, to step in once more.

It bailed out Dubai to the tune of $10bn earlier this year.

'The relationship is very close,' Soussa said. 'Abu Dhabi is the main sponsor in the UAE and we expect Abu Dhabi to support the government of Dubai.'

The more conservative capital is unlikely to let Dubai fail, although economists believe that support from Abu Dhabi may come at a price as it threatens the autonomy which allowed Dubai to establish itself as the Middle East's main business centre.

Property is something of a barometer of the financial health of this desert emirate, charting its ups and downs.

'Speculators were treating property like a grocer would a can of beans on the shelf, with no intention of eating it and only wanting to hold on to it for a day or two,' Grobbelaar said. 'But they got their fingers burnt.'

Today some sanity has returned to the market. Two thirds of property transactions in the past three months have been made without a mortgage, indicating serious investors are convinced the market will recover in the long term.

But whether this putative revival will return Dubai to its glittering pomp is anyone's guess.