If anyone doubted scale of crisis, work even halts in Dubai on world's tallest tower

WORK on what was to have been the world's tallest building has been halted for at least a year, as the financial crisis makes itself felt in Dubai.

Developer Nakheel's decision to shelve the project, which it unveiled only in October, came as a leading credit rating firm warned that falling property prices leave the outlook for the country's banking sector looking negative.

The moves are the latest signs that tough economic realities are quickly catching up with the ambitious, fast-growing city.

A report this week showed home values in the emirate tumbled 8 per cent in the past three months from the previous quarter, marking what analysts say is the first such decline in years.

The skyscraper – billed as at least two-thirds of a mile tall – was designed to top a rival's nearly complete tower that will be the world's highest.

In response to questions, the state-owned Nakheel said that "further work" on the building's foundations "will commence in 12 months". The developer did not say how much work, if any, had been completed.

Meanwhile, credit rating firm Moody's Investors Service said the outlook was negative for banks in Dubai and elsewhere in the United Arab Emirates.

The firm cited concern about loans given to "opportunistic" property developers in light of falling real estate prices. Other worrying signs included tighter liquidity, falling equity values and the steep drop in oil prices.