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What does the Dubai property collapse mean for the UK?

As we covered yesterday, the announcement that the main property developer in Dubai, and state-owned parent company, has asked for debt repayments to be suspended is a major blow for the sector. Even though the Dubai property sector has fallen substantially over the last 18 months, many were still surprised that the main developer Nakheel appears to be in so much trouble.

In effect the company is part of an operation which owes in excess of $60 billion, used to fund the property boom in Dubai which has seen prices rise to the sky and then fall through the floor. This move is likely to see property companies around the world highlighted with particular emphasis on those with significant debt and those who may well be sailing close to their banking covenants.

From a sector point of view the shock of the move in Dubai is likely to have an impact on property company share prices in the short term as analysts and investors come to terms with this surprise development. This comes at a time when the UK property sector in particular is still struggling to pull free of the credit crunch induced recession which has not been assisted by the lack of liquidity in the commercial money markets.

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