The head of Nakheel, the $80 billion Dubai property business, gave warning yesterday that the real-estate recession in America is far from over and will deteriorate rapidly should the price of oil reach $200 a barrel.

Chris O'Donnell, chief executive of Nakheel, said that the US property market had never had to cope with the combined impact of a sub-prime mortgage crisis and a surging oil price. “We have not hit the bottom yet,” he said.

Mr O'Donnell, whose Dubai Golden Mile development of flats and offices has begun selling for record prices, also said that while commodity prices had risen sharply, the cost of labour across the United Arab Emirates had also increased about 25 per cent. Companies such as Nakheel had benefited from a cheap Indian labour force, but over the past few years the booming economy in India has pushed wages up, making these immigrant workers more difficult to attract.

In response, the Dubai-based company has built improved accommodation in a project called Omran, which it claims is constructed to a similar standard as that of a three-star hotel.

Mr O'Donnell said that Nakheel would be seeking investment opportunities in the US and the UK to take advantage of softening real-estate prices, but added: “No one knows for sure the outcome of the possibility of $200-a-barrel oil. Where is the bottom of this cycle?”