Dubai hit hard by financial crisis
Once the epicentre of global boom with skyscrapers rising into the sky like mushrooms, today Dubai resembles a hungover partygoer. Retail stores displaying “80% off” discount signs in their stores and talk on the street about companies repatriating foreign workers is hitting Dubai just like much of the rest of the world.
The other headlines coming from Dubai concern the real estate crash which is evident from the herds of professionals getting laid off and flocks of shopping-obsessed tourists disappearing. Not only that but real estate prices seem to be plunging with NewsFromRussia.com reporting that “A four-room villa, which was evaluated at $4 million several months ago, is now available for $2 million“.
A few months ago the big Dubai developers were still talking about recovery in the first quarter of 2009 but already three months into the year this appears to be wishful thinking. Dubai’s second largest property developer Deyaar recently announced that it would be putting at least 25 per cent of its projects on hold. The outlook is grim.
Several real estate properties have already dropped in price by up to 50% and we have not even seen the full extent of the global financial crisis. Analysts forecast much steeper forecasts ahead. Dubai’s economy diversified away from oil towards real estate and tourism making it extremely vulnerable to today’s market conditions.
The highly respected MarketOracle website has an even gloomier forecast: “A warning to those investors being swayed, the Dubai property crash has only just begun which seeks to correct a 6 year property boom. The Dubai construction boom is expected to come to an imminent halt with many partially finished projects littering the landscape as investors walk away from the off plan deposits in the wake of the ongoing crash in property values. It remains to be seen how much of this excess supply will eventually be reclaimed by the desert as many foreign investors in off plan Spanish properties are painfully experiencing. My expectations are for an average 50% retracement in Dubai property prices from the peak, with many of the more over-leveraged high end properties possibly crashing by as much as 75%.”
For those investors still considering putting their money into Dubai Real Estate, the following video might bring some cautionary insight. The coming months will tell what’s in it for Dubai’s once bustling property market…