Investing Blog

Dubai World, an investment arm of the United Arab Emirates, indicated on Friday that it would need as much as 6 months as an extension on its debt obligations. Though the market may have dipped on Friday, Dubai’s debt is little concern going forward.

Dubai World

To understand why this should have been expected, we have to know what Dubai World does. Dubai World is a development company based in the United Arab Emirates that builds luxury condos, homes, and vacation hotspots, even going as far to make it’s own exotic islands. The picture below is of the palm tree islands, man made off the coast of the UAE.

$60 Billion is Nothing

The case of the Dubai debt extension just goes to show how poorly real estate investments are performing all around the world, and $60 billion is just a small stain on the overall health of the real estate economy. Though Dubai World may be insolvent, the company is backed by the fiscal health of the government, which continues to bring in hundreds of billions of dollars though the sale of oil each year.

Dubai World Was Speculative

Dubai World was largely a speculative entity created by the government of the UAE as a way to convert huge commodity profits into long lasting entities. The United Arab Emirates then spent billions on developing a tourism driven economy. At one point, Dubai was home to more than ½ of the world’s cranes, showing just how much the government and private enterprise were willing to invest.

Dubai Signals the End

I don’t see Dubai as the continuation of the real estate meltdown, but rather the end. The failure of the single greatest spot for real estate growth to house a profitable company shows that real estate around the world is finally finding sensible price points.

Real Estate