Recent booms in Dublin and Dubai have a lot in common, writes JACK FAGAN.

YOU MIGHT think that Dublin and Dubai have little in common but anyone keeping an eye on the property market will be aware that both experienced a boom and bust at the same time.

And the similarities did not end there. Both overleveraged and overextended in the belief that commercial and residential values would go on rising and that the punters would continue to pour in investment funds. In both instances, the banks had played ball, happy to compete with each other to fund ever more developments. No one thought of putting controls in place.

If you thought that the building boom in Dublin was rather hectic in 2005 and 2006 it was only a shadow of the construction activity in Dubai – dubbed the brashest creature of globalisation.

There, a largely overseas workforce operated around the clock in three different shifts to complete the world’s most ostentatious and expensive projects in months rather than years.

Developers competed with each other to create bigger and better developments during the six-year boom but, with most of the grandiose projects founded on debt, the game was up as soon as the global financial crisis hit. The rapid change of circumstances and the depth of the slowdown took Dubai by as much surprise as it did in Dublin. By then it was too late for hundreds of Irish investors who bought rental properties either in fanciful desert developments or on man-made islands on the high seas in the belief that Dubai would become a crucial staging post in the shift of economic power from the west to Asia.

Many property speculators – often buying off-plan before a brick was laid in the hope of quick sell-on – have been burned. The chronic events of the past year, coupled with a sudden fall off in tourism, has forced Dubai to look again at its strategy. Some experts believe that the openness of an economy built on finance and property investment leaves it ill-placed to weather the storms raging elsewhere.

While Ireland’s serious budgetary problems, banking scandals and excessive property lending have been widely portrayed in the main business capitals, Dubai remains paranoid about its problems being aired overseas.

It moved quickly to deal with a serious shortfall in its finances by borrowing $10bn from its wealthy oil-producing neighbours in Abu Dhabi.

This is being used to refinance its debts and help government sponsored companies to meet their commitments. Unfortunately for Ireland, it cannot rely on a similar dig out – except perhaps from the IMF.

Like Dubai, Ireland has seen many of its overseas workers returning home following the ending of the construction frenzy. It has been a sad but inevitable end to a boom that couldn’t last. At least Dublin has not had the ignominy of seeing foreign workers abandoning their cars at the airport before they defaulted on their loans.

This has become quite common in Dubai where the jails are filling up with people accused of bouncing cheques – a criminal offence. Lucky we don’t have a similar law here. With the jails already overcrowded, the Government would probably have to anchor a boat off Howth to accommodate the huge number of offenders.