Low-paid workers and villa gripes cast a cloud over 'eighth wonder of the world' in Dubai

Pitfalls in paradise: why Palm Jumeirah is struggling to live up to the hype

Dubai's sheikhs have claimed it is "the eighth wonder of the world", and seen from space the tree-shaped sand and rock formation of the Palm Jumeirah looks exactly that.

But after the hype about David Beckham buying a mansion here and the novelty of living four miles out to sea has faded, that claim is starting to look shaky. It seems there is a little trouble in paradise.

Four thousand "Palm pioneers" have moved in and are getting to grips with life in the sweltering Arabian Gulf. This week, when the Guardian visited, the gripes were as common as the plaudits among the Brits who are in the vanguard of this new community.

Multimillion-pound villas have been squeezed together "like Coronation Street", air-conditioning bills are hitting £800 a month and persistent snags have led some to joke it is more "eighth blunder" than "eighth wonder".

The villas were developed by the government-owned Nakheel Properties, and many residents believe the company's slogan, "Our vision inspires humanity", which flutters on flags around the place, is beginning to look over-egged.

It is not all bad news. The blue seas which lap the man-made shores are teeming with rays, hermit crabs and baracudas. Away from the ongoing construction, which has four years to run, life in the middle of the ocean is incredibly peaceful.

But for Rachael Wilds, 42, an exhibition organiser from Surrey who moved in with her family to a palatial villa on one of the Palm's "fronds" a year ago, it was not what she expected. She found her £3m property squashed against a neighbour's and set in a barren, almost treeless, landscape. "It was absolutely nothing as it was depicted in the brochure," she says. "There was a massive gap between the villas and it was full of lush tropical gardens. We were totally shocked at the closeness of the villas."

Despite summer temperatures of 48C and high humidity, access to centralised air conditioning was not included in the purchase price of apartments, and residents are rebelling against plans to ask them to pay extra. More seriously, there is evidence the low-pay and hard conditions endured by the thousands of migrant workers who built the area are driving many into despair and debt.

It has made for an awkward start for a development that is far more than a whim of the Dubai royal family. Palm Jumeirah is the testing ground for the United Arab Emirates' strategy for life after oil - big-scale tourism. Once complete, there will be homes and hotel rooms for 65,000 people.

Crucially, the Palm adds 40 miles to Dubai's coastline. The sheikhs are gambling this will keep the visitors coming back. Two even bigger man-made islands are under way along the coast: a replica of an existing island called The World and another called The Universe.

The lab rats in this experiment are a strange mix. They include England footballers, a battalion of middle-class Britons from places such as Salisbury and Weybridge, and even, it is said, Hamid Karzai, the president of Afghanistan, who is thought to have a house opposite Kieron Dyer, the West Ham midfielder.

Raffaele Cannas, 47, a British property consultant, was one of the first to pick up his keys in late 2006 and found himself squeezing a couple of England players into his Mini after they'd asked to see how he had decorated his apartment. "I didn't know who they were at first, but I had David James doubled up in the front seat and Andy Cole tucked in the back," he says.

After the Brits came the Russians, and a growing number of rich Iranians. Many aspects to life here are undeniably good. Residents can soak up an incredible amount of sunshine - some years it never rains - and the beaches are groomed at least twice a week.

But this is no picture-book desert island. Its size is the most arresting characteristic for newcomers. An eight-lane motorway is at the Palm's trunk, and each frond is a mile long. Meanwhile, there is yet more expansion, with 40 hotels being built on the breakwater.

At times it is also a harsh environment. Lawns routinely wither without intense watering and the tallest trees are, in fact, mobile phone masts dressed up to look like palms.

Just 18 months after moving in, Cannas is thinking of leaving for New Zealand. "The marketing machine was so powerful, calling the Palm the eighth wonder of the world, that people's expectations went through the roof," he says. "It hasn't turned out like that."

For many soaring property prices have softened any discomforts. A "signature villa" which went for £750,000 in 2002 is now worth £3m.

A nagging guilt for some is the quality of life of the migrant construction workers who built all this. Most are from India and Bangladesh and they travel in bus convoys from labour camps in the desert each morning.

A typical labourer earns £25 a week, and many are in debt to agents in their home countries who paid for their passage. KV Shamsudheen, a workers' rights activist in Dubai, says interest rates can be as high as 120% a year.

One hundred migrant workers killed themselves in the Emirates in 2006, and the trend is rising, he says. Alcohol is a growing problem, with workers racking up debts to buy drink.

In Jebel Ali, a dusty camp almost 10 miles from the Palm, 30,000 male workers live up to 12 a room in prefabricated blocks. "I am not happy," says a Bangladeshi carpenter known locally as Sofiull, 52. "The company said I would earn £60 a week, but I am getting £30. They have delayed my pay two months and it's a great problem."

Mohamed Mahboub, 30, has been in Dubai for three years. He hasn't seen his daughter since she was a baby, but sends £30 of his £45-a-week supervisor's salary home. "I miss her, but I am a poor man and I owe money, so I cannot go back yet," he says.

It is a world away from the exclusive gated fronds back on the Palm, where the only sound is often the splash of a paddle from a kayak, the favourite pastime of Palm dwellers.

"Life here is 150% better than in the UK," says Donna Dempsey, 46, a ballet teacher from Kent. "We have our garbage collected every day, we have clean streets, we have low crime. You can really chill here. Sometimes it's hard to go to work."

In numbers

13m

The number of litres of desalinated drinking water the Palm Jumeirah uses when at capacity

28

Bottlenose dolphins have been flown in from the Solomon Islands to populate Dolphin Bay, an 11-acre lagoon

94m

The cubic metres of sand used to build the Palm Jumeirah

84

The site has doubled the natural 42-mile coastline of Dubai

4

The Palm is four times the size of Hyde Park in central London