Like Las Vegas, Dubai is so odd, you never forget the first time you arrive. For me, it was a November morning in 2003. I drove past the dredgers creating canals in the desert that would soon become the marina, and ended up at the Hilton. The hotel was so far from the airport, on an isolated strip of beach, I wondered whether I was in Dubai at all, or had drifted off into Abu Dhabi or Saudi Arabia.

As I flew over the Palm Jumeirah, the man-made palm-shaped island emerging from the waters of the Gulf, I wondered what would happen to a city whose rulers were playing Lego for grown-ups. Were all the islands, skyscrapers, snow domes, shopping malls and underwater hotels for real? Or were they sand castles that would one day collapse into the sea?

Last week I went back, on the latest of more than 20 visits. The good news is that Dubai has grown so rapidly, you cannot even see the Hilton any more. It's hidden behind the sandstone towers of the Jumeirah Beach Residence, which are among the thousands of skyscrapers that confirm Dubai as the fastest-growing city in human history.

The bad news is that the economic model that got Dubai so far so fast has run into the sand. The property sector has collapsed. Construction has all but stopped, and prices fell by 41% in the first quarter of this year, according to the real estate consultancy Colliers International.

Behind the raw data are people: people like David and Leanne. David, 33, set up a firm offering consultancy services to contractors. Leanne, 28, got a job in human resources for a local contractor. Last year, they bought their first property: a three-bedroom, £500,000 flat in the marina. Almost a year on, they are about to do something they never imagined they would: run away.

Any day now, the couple — who don’t want to reveal their full names because, under Dubai’s strict bankruptcy laws, debtors can be jailed simply for bouncing a cheque — will head to the airport with their four children and leave. Leanne has been laid off and the contractor David’s firm works for hasn’t paid him a dirham since December. The flat is worth 25% less than they paid for it, pushing them into negative equity, and they are down to the last of their savings. “Our lawyer told us that, as debtors go to prison here, we should leave while we can and negotiate from a position of strength abroad,” Leanne says.

The shop windows in the upscale Jumeirah district confirm that David and Leanne are not alone. Classified-ad notice boards are chock-full of fliers for yard sales being held by expatriates who are skipping town. Even pets are up for grabs. “Free to good home,” it says above the photos of beloved dogs and cats in the window of the Park’n’Shop supermarket on Al Wasl Road.

It wasn’t meant to be this way. In 2000, the emirate’s leader, Sheikh Mohammed Bin Rashid al-Maktoum, invited westerners to move to Dubai. The city state’s unique selling point? Buy a house and you’ll get a resident’s visa. In return for putting up with living in a sandpit the size of Kent, where temperatures reach 50C in summer, westerners would help to create the Singapore of the Middle East — and get filthy rich along the way.

It started well enough. Dubai began to build itself onto the map. There was the Palm Jumeirah, the World — 300 reclaimed islands in the Gulf, arranged in the shape of a map of the planet — and the Burj Dubai, the world’s tallest skyscraper. Each time I visited, Dubai seemed to have doubled in size.

Property prices quadrupled between 2002 and 2008. Anyone who bought and sold between 2000 and July last year — that includes the Chelsea footballer Joe Cole and Simon Cowell, the creator of the X Factor, who both flipped villas on the Palm Jumeirah — made a killing. As one British investor puts it: “When times were good, you couldn’t lose. Prices went only one way: up.”

Anyone who bought in the past year, however, is in limbo or nursing a loss. Saeed Gupta, 33, an Indian-born Londoner, started dabbling in property when he moved to Dubai five years ago to manage an upscale boutique in the Mall of the Emirates. Last year, he put down deposits totalling £50,000 on two flats in new inland developments.

The developer says it will finish the first project in time for him to move in next year, but it is unlikely to finish the second. It will be 18 months before he gets his deposit back — without interest. He’s worried he might not see his money at all: “What if the developer goes bust in the next 18 months?”

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