Doubting Dubai

The gulf's ultimate boomtown depends on real estate, not oil. It's beginning to looking vulnerable

STEVE CRISP / REUTERS

Property values could tumble as much as 20 percent in the next three years in Dubai.

Saif Ahmed began living the Dubai dream five years ago. Armed with an M.B.A. from the University of Toronto, the Canadian entrepreneur moved to the gulf city-state and co-founded property developer Universal Canlink Inc. By 2006 the firm had annual revenues of $15 million, luring foreign investors with tales of "meteoric" growth in the local property market. Lately, with the global financial downturn spreading to the Middle East, Ahmed has come back to earth. "Before, people were buying blindly, without asking much about the details," he says. "Now such risk takers have disappeared."

Among the signs of the changing mood: Nakheel,...

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