Desert storm

Sky's the limit ... Burj Dubai.

IT has long been lauded as a paradise for the rich and famous - but lavish Dubai is on the brink of BANKRUPTCY.
The Middle Eastern state triggered a meltdown on world stock markets yesterday, warning its biggest state-owned company, Dubai World, could no longer repay debts.

Teetering on financial ruin, the days of Dubai being seen as a millionaires' playground appear over.

The likes of David Beckham, Brad Pitt and thousands of wealthy expats with properties in the emirate could lose a fortune.

And with £40BILLION wiped from the value of Britain's biggest firms yesterday as markets crashed, the investments of millions of savers and pensioners have taken a hammering too.

It is not long since Dubai was being celebrated as a rich man's nirvana - a tax-free haven where east and west could do lucrative business together.

High-rise buildings sprung up at an alarming rate and the sail-shaped Burj Al Arab hotel - the only seven-star hotel in the world - became the ultimate symbol of Dubai's opulence.

Forty years earlier Dubai was a pearl-fishing village on the edge of the Arabian desert. Locals lived in mud shacks and camels wandered in date palm groves.



But celebrities and the wealthy flocked to buy lavish properties on The Palm Jumeirah sand-island development when they went on sale in 2002 - and the 2,000 properties sold out in a month.

Crisis
Footballers Beckham, Michael Owen and Joe Cole were among those who snapped up luxury apartments on the island, as well as Angelina Jolie and Brad Pitt.

Last year, Kylie Minogue headlined a £12million party at Atlantis, The Palm hotel, crowning The Palm Jumeirah's self-styled reputation as the "Eighth Wonder Of The World".

Headlined ... Kylie Minogue performed at Atlantis opening

But as the world economy went into meltdown, stories began to circulate earlier this year of sports cars abandoned at Dubai International Airport as their expat owners fled stringent bankruptcy laws.

And yesterday's news that the government-owned investment company Dubai World has asked for a six-month delay on repaying debts to 100 Western and Islamic banks sparked fresh crisis.

The FTSE 100 plunged by 170 points - its biggest fall since March. And the Pound tumbled against the US Dollar as experts feared a NEW banking crash.

Analysts said some of the UK's biggest banks could lose millions invested in Dubai. One of the most vulnerable could be RBS.

Stuart Law, head of property investment specialist Assetz, warned: "Dubai is bankrupt - simple as that."

Living in luxury ... Palm Island

Living in luxury ... Palm IslandDubai World spent the boom years hoovering up trophy assets around the world, including golf courses and hotels.

Their subsidiaries own everything from Barneys department store in the US to the QEII liner. These could now be sold off as Dubai's sheikhs scramble to raise cash.

The financial problems stem from a massive bubble in Dubai's housing market - and the £36billion debt taken on by Dubai World during their buying spree.



Property prices in Dubai rocketed once a restriction on foreign investment was lifted in 2002 and from mid-2007 to mid-2008 prices soared almost 80 per cent.

But the credit crunch put the brakes on the number of people emigrating to the emirate and buying property. This burst the housing bubble, caused prices to freefall and many property projects are left uncompleted.

The imposing Burj Dubai is the world's tallest man-made construction - but it remains unfinished.

Simon Ford is one of the businessmen who came unstuck. For four years he ran Blue Banana, an online luxury gifts company.

But when rapid over-expansion pushed the company into debt of between £100,000 and £200,000, the bank pulled the plug.

In June, Simon and his pregnant wife fled the country because, under United Arab Emirates bankruptcy laws, if your company collapses you are liable for the debts and will be sent to jail until everything is paid off. He later wrote an open letter of apology to customers and suppliers.

It said: "I am not running away from debt, I am purely protecting those dearest to me and getting out of a country which... drives people to make horrible decisions."

Hit
Swiss bank UBS fears Dubai's property market could plunge almost 70 per cent from its peak a year ago. Chelsea and England ace Joe Cole sold his apartment at the right time, pocketing £2.1million last summer.




Cricketer Andrew Flintoff probably has the right idea - he is RENTING as he and his family spend the winter in Dubai.

UK firms Travelodge and Madame Tussauds could also be affected as they are owned by a separate Dubai company Dubai International Capital (DIC).

While it is far more healthy than Dubai World, it could be hit as foreign investors pull money out of the emirate.

Neighbouring Abu Dhabi is poised to lend Dubai £9billion in emergency funding - and more could follow. One expert said: "This will be the most embarrassing thing. Imagine England going cap in hand to Scotland and the Scots then eyeing up some of your biggest assets."

Assetz's Stuart Law said property prices would continue to fall next year.

But he added: "Dubai will come back. This could actually present people with one of the best buying opportunities they will ever see."

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