The world’s tallest building is being opened in Dubai Monday

–(– 01/03/2010 – Housing industry news provided by Financial News USA. The world’s tallest building is being opened in Dubai Monday, and as the globe watches the official unveiling of the skyscraper that will dwarf Canada’s CN Tower, Taiwan’s Taipei 101 and Malaysia’s Petronas twin towers, many investors will think of the Skyscraper Index.

The new giant is the Burj Dubai, a steel-and-glass tower whose exact height is not yet known but which is rising more than 800 meters (half a mile) up in the air. CN Tower, Taipei 101 and the Petronas twin towers are all less than 540 meters.

The celebration takes place a little over a month after Dubai, one of the seven emirates of the oil-rich UAE, shocked markets as state-owned construction conglomerate Dubai World asked for a standstill agreement on its $26 billion in debt.

The debacle lends more credence to the Skyscraper Index theory, which was created by economist Andrew Lawrence in 1999 and postulates that building the world’s tallest skyscraper coincides with the onset of a major downturn.

“The ability of the index to predict economic collapse is surprising,” economist Mark Thornton wrote in a paper about the index.

Wealthy neighbor Abu Dhabi offered Dubai a $10 billion lifeline in December, the third this year, but investors are still worried about the small emirate’s economic health.

Does the Index Work?

The first crisis predicted by the Skyscraper Index was the Panic of 1907 in the US, sparked by the fact that a bank regulated under the National Banking system refused to clear funds for unregulated fund Knickerbocker Trust.

Widespread runs on banks and a sharp downturn followed. But before the Panic, construction had started on the Singer and Metropolitan Life buildings, which were to become the tallest in the world in 1908 and 1909.

In the late 1920s, three new record-setting skyscrapers were announced and in 1929 the Great Depression began.

The building of the World Trade Center twin towers and of the Sears tower preceded the 1970s period of stagflation, while the building of the Petronas Tower in Kuala Lumpur was just in time for the Asian crisis of 1997.

But the index is far from perfect, and Lawrence himself noted that it failed in the case of the Woolworth building, the world’s tallest building in when it opened 191.

Nor were there any predictions of the severe downturns of 1920-1921, 1937-1938 and 1980-1981, and it neither predicted the case of Japan, whose economy has suffered since the early 1990s, according to Thornton. About Financial News USA

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