Iconic Dubai Project Flounders

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Once the symbol of Dubai's real estate decadence, mixed-use Palm Jumeirah development now exemplifies the collapse of the emirates' luxury market.

Prices on the array of man-made islands have fallen by 70 percent in two years, PropertyWire reports. Property that once attracted $626 a square foot is now selling for $191 a square foot. A three-bedroom apartment on Shoreline recently sold for $422,000--an unheard of price for a project representing the top end of Dubai opulence.

Almost all the major hotels planned for the islands have been delayed, according to Property Wire. But the "hardest hit" has been the Trump International Hotel. "Not only has the work stopped but the site has been leveled with no re-start date given," the magazine reports.

Although at least one analyst predicts prices will continue to drop, developers expressed confidence that Palm Jumeirah will regain its mojo.

"The recent downturn did slow down the progress. However, the hotels are going ahead and construction is advancing very well now," Andreas Mattmuller, senior vice president for hotelier Mövenpick's Middle East and Asia division.

Similar discussions are occurring throughout the Dubai market. An article in the International Herald Tribune this week notes that many Dubai owners stubbornly refuse to lower their prices, created a form of "real estate stalemate."

"People here are living in a bit of a dream world," David Terry, a luxury-sales specialist for Luxhabitat, told the IHT. "They were used to the profits they were making before."

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