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What can we learn from Dubai?

It has been revealed that the Dubai authorities are in debt to the tune of $60 billion as their attempt to push Dubai to the head of the worldwide investment market has spectacularly backfired. While there is no doubt that the state has improved its worldwide profile and worldwide standing over the last decade much of this has been done on the back of significant and ever-growing debt.

However there is most certainly a firm base for the future, even if the Dubai property market may have downside in the short term, and investors will be monitoring the situation very carefully. It is ironic that initially the Dubai property market was one of the more stable areas of the worldwide investment arena as the credit crunch hit home and the recession began to cause problems in other areas of the world. However, once investors decide to cash in their chips we saw something of a domino effect which very soon lead to distressed selling and various regulatory changes in the set up of the Dubai banking sector.

When you bear in mind that the UK government has invested nearly £200 billion into the quantitative easing program, the $60 billion debt accumulated by the Dubai authorities seems miniscule in comparison. However, there are some significant differences between the UK economic investment programme and the way in which the Dubai authorities literally piled their debt higher and higher as they chased overseas investors.

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