Three years since global markets were rocked by Dubai World's decision to renegotiate US$25 billion (Dh91.83bn) of debt, the emirate's economy is bouncing back with its fastest rate of growth since 2007.
Dubai's economy grew at a rate of 4.1 per cent year-on-year during the first half of this year, led by the tourism sector, according to the Dubai Statistics Centre.
The rate was the emirate's biggest increase in GDP since five years ago, when the economy registered an 18.1 per cent rate of growth.
Falling borrowing costs and a strengthening property market have also helped to convince investors that Dubai has weathered the storm - at least for the time being.
"It's clear that the worst is behind us," said Rami Sidani, the head of Middle East and North Africa equities at Schroders.
Nakheel's announcement that it would seek a standstill on its debt repayments sparked a crisis at its parent, Dubai World, which soon resulted in a cascade of corporate restructurings among the emirate's government-linked holding companies. A liquidity crisis followed in the UAE's banking sector, and lenders are still putting aside vast sums of capital to deal with the costs of bad debts, with such provisions totalling Dh65.4bn at the end of September.
Although local banks have been prevented from lending excessively as a consequence of a number of Central Bank regulatory drives that began last year, credit is still inexpensive by international standards.
The cost of companies finding funding has fallen steadily this year as the UAE's bond markets are flooded with cheap credit from Asian investors, who have snapped up new bonds and sukuk from high-yielding corporations and state-backed investment funds.
Projects shelved by the crisis, including a replica Taj Mahal four times the size of the original and Mohammed bin Rashid City, planned home to the world's biggest mall and 100 hotels, have been restarted.
The emirate's 10-year government bond yields have fallen 144.56 basis points from the start of this year to 4.4059 per cent. Bond yields move in the opposite direction from price. Meanwhile, credit default swaps on Dubai's government bonds, which reflect the cost of insuring an issuer's debts against default, have fallen from a peak of 987.50 basis points in 2009 to lows of 279.85 basis points this month.
Property prices have also recovered as long-term homeowners return to the market alongside a steady trickle of speculative buyers - who once accounted for the majority of transactions and who were blamed for inflating the emirate's pre-crisis property bubble.
According to data from Jones Lang LaSalle, Dubai house prices plummeted from an average of about Dh9,700 per square foot in 2009 when the crisis hit to just Dh8,300 per sq ft a year later.
However, with a surge in the market this year, average sales prices on the three-year anniversary of the crisis are now 2.5 per cent higher than they were in 2009 at about Dh9,950 per sq ft. However, some property firms are concerned by the sudden bounce in the market.
"We have concerns about the rapid increase in house prices in Dubai, especially in the Downtown area and Arabian Ranches and we see that this could lead to a potential downturn in the market where prices will slip," said Ian Albert, the regional director for Colliers International's Middle East operation. "There is an element of speculation to that which concerns us."
Dubai's stock markets also remained sluggish, with market liquidity "the weakest link of the recovery", said Mr Sidani.
There has not been a new initial public offering on the Dubai Financial Market since 2008, and the DFM General Index is down 74.5 per cent since its highest point that year.
"It's a shame that Drake & Scull International is still the last company we had and that was back in 2008," said Mr Sidani. "Some issues have to be resolved in order to go back to better liquidity and attract new companies to list on the market."
lbarnard@thenational.ae
* with agencies