Goodbuy Dubai?

While credit is being extended during an upswing people become obsessed with property. Dubai is a great example of this. Dubai is a complete white elephant as an investment goes and may never fulfil the dreams of its creators.
When property madness engulfs a region crazy decisions are made. Skyscrapers, thousands of apartments, the visions are endless. In reality this is what happens during the expansion phase.
A) Developers see potential in regions of low productivity.
B) Excessive building to maximise the return on the land during the upswing.
C) Over investment in capital which has a lengthy payback period.

This all sounds like Dubai to me. Why would anyone want to invest in a region which has spent billions on dollars to create cities in a desert? There is and never was any reason to go there.
I know the oil is running out and they need to diversify their income. History tells us that property investing is a bad idea. (see below on the Florida land boom)
It gives an artificial wealth effect and in real terms it doesn’t create capital for future investment. Dubai would have been better if it had identified a manufacturing or research industry where it could have carved out a global niche for itself. Now it will be left with billions in sunk costs, frozen assets and a government which will be bailed out by its neighbours. Future investments by the government will be minimal as they will not be able to borrow money on the international markets.
People have short memories.
If any readers watch the Simpsons. You should watch the Monorail episode. Springfield had spare money. It had options, improve existing infrastructure etc or invest the money on an idea suggested to them by con man.
Monorail was that vision. Monorail would make every thing better. Dubai sold the vision of a new life in the desert. Everything would be better. In the episode the travelling sales man makes off with all the money, lets call him the banker for this example. The people and the town are left with a nightmare monorail system and are broke. For illustration we can imagine them as the government and citizens of Dubai. At the end of the episode the con man escapes Springfield by plane but his flight has to make an emergency stop at North Haverbrook, a city where he previously sold a monorail dream. The dream turned into a nightmare and the city went bankrupt. The shops closed and the city became a boulevard of broken dreams.
The question is, will Dubai become the next North Haverbrook?

The Simpsons is only a cartoon after all. During the 1920’s in Florida they had a land boom.
Here is an excerpt for the article Money, Credit and Crisis by Mason Gaffney.
The Florida land boom of the 1920s is well-known as an object of
historical curiosity. Only a few contemporary observers recognized its
economic significance. In his 1931 book Only Yesterday, Frederick
Lewis Allen journalistically described at length the real estate frenzy
that overtook Florida from 1922 to 1925 ([1931] 1959: Chap. 11). He
said only a little about the connection with banking, but it was highly
suggestive of the economic meaning of the land boom:
In 1928 there were thirty-one bank failures in Florida; in 1929 there were
fifty-seven; in both of these years the liabilities of the failed banks reached
greater totals than were recorded for any other state in the Union. . . . Bank
clearings for Miami, which had climbed sensationally to over a billion
dollars in 1925, marched sadly downhill again:
1925.............................$1,066,528,000
1926................................632,867,000
1927................................260,039,000
1928................................143,364,000
1929................................142,316,000 (Allen [1931] 1959: 199–200)
1022 The American Journal of Economics and Sociology
The previous rise of bank clearances had been equally rapid.16 The
bank-clearance data reveal the extreme local effects of the land boom
on the banking system, and they hint at the severity of the banking
contraction that occurred during the downswing of the cycle.
Homer B. Vanderblue (1927b) explained the way in which real
estate lending in Florida drove down the capital ratio of the banks and
how that led to their failure in 1926: At the end of December, 1925, many of the Florida banks had deposits 20 and 30 times their combined capital and surplus; as these abnormally large deposits were drawn down, such banks as had become involved in the real estate speculation through heavy loans to “operators” and “developers” found themselves unable to meet the demands made upon them. (1927b:266) It is instructive, however, that only one Florida bank that was a member of the Federal Reserve system failed in 1926 (Vanderblue 1927b: 268). The Federal Reserve Bank insisted that its member banks follow the discipline of the “real bills” doctrine. As one observer noted
in 1927:The Federal Reserve System is properly given a great deal of credit for our present prosperity. The business world is now so well organized that any tendency towards trouble is quickly stopped before becoming general. As
an example, the deflation of the Florida boom in the old days would have
caused a country-wide panic, but now it made only a ripple on the surface.
(Credit Digest 1927, qtd. in Holland 1972: 57)
It seems doubtful that the boom and crash in Florida real estate
created only a “ripple on the surface,” since many independent banks
in Florida failed, and banks outside of Florida were also involved in
real estate loans. Their loss of liquidity almost certainly contributed to
the weakening of the national banking system. Nevertheless, the
Florida experience did demonstrate that if all banks had stayed within
the bounds of the real bills doctrine, that sort of prudence would have
avoided the instability that followed. Florida was only the most sensational case of the 1920s. Because of journalistic accounts at the time, it seemed to be in a class by itself. But it was not. Allen ([1931] 1959) touched on the effects of the real estate bubble of the 1920s elsewhere. He mentions the many skyscrapers built in Manhattan (among other cities) during this period, which ultimately ended up creating excess capacity.
The final phase of the real-estate boom of the nineteen-twenties centered
in the cities themselves. . . . There is scarcely a city which does not show
a bright new cluster of skyscrapers at its center. The tower building mania
reached its climax in New York . . . coming to its peak of intensity in
1928. . . . [B]etween 1918 and 1930 . . . [office space] was multiplied
approximately by ten. . . . The confidence [was] excessive. Skyscrapers
[were] overproduced. In the spring of 1931 . . . some 17 percent of the
space in the big office buildings of the Grand Central district, and some 40
percent . . . [in] the Plaza district farther uptown, were not bringing in a
return. . . . [F]inanciers were shaking their heads over the precarious condition
of many realty investments in New York. ([1931] 1959: 203–204)
Those financiers were shaking their heads because their investments
were causing serious problems as nonperforming assets on their
balance sheets. Yet, because these effects were localized, the financial
damage caused by the excessive building of the 1920s is seldom
mentioned by economists seeking the causes of the Depression.