Dubai’s boom was always a mirage made up of fast money, mass immigration, low taxation and gentle regulation. Unlike its neighbour, Abu Dhabi, Dubai has almost no oil but cleverly decided to boost its economy as a financial and leisure centre for neighbouring cash-rich but service-poor Gulf economies. It became a magnet for Saudis and Iranians seeking a liberal environment in which to play global financial markets and work off personal stress. A vast community of expatriates arrived to service their whims and their business needs – bankers and lawyers from the West, builders, cleaners and general factotums from the East. Their numbers represent 80 per cent of Dubai but their commitment is only as solid as their pay cheque. As one banker said: “If I default on my mortgage and go back to Pakistan, what is HSBC going to do about it?”

The pricking of Dubai’s bubble became official in November, a day after the Las Vegas-style opening of the enormous Atlantis hotel. Abu Dhabi agreed to stand behind the financial obligations of its flighty kid sister in an attempt to restore confidence. No one knows the extent of the guarantee but it is assumed to relate to the corporate ventures of the Emir and his family. Two struggling mortgage banks were then bailed out and shuffled into a new state-owned entity. Yesterday the Government of Abu Dhabi was forced to inject a further $4 billion (£3 billion) into three of its banks.

Confidence is not restored.

Landmark Advisory, a local real estate company, expects house prices at least to halve this year and rents to fall by a fifth. For Abu Dhabi, there is always the oil and gas but for its wayward sibling the future is no more solid than the shifting sands of the surrounding desert.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive