Property prices in sunny Dubai have already dropped 48% since last year, and they are about to fall another 20% according to research firm Colliers International. The global economic crisis has taken its toll in Dubai as in most other places, and as more completed developments reach the market, prices are falling quickly as demand drops away. This is not predicted to change until demand once again outstrips supply.
Colliers surveyed twenty-three local developers and nearly three-quarters believed the market had not yet found its nadir. Although many developers have downed tools on projects and thousands in the construction industry have been laid off, there is still a 25% oversupply of residential properties in Dubai. That’s around 340,000 residential units, with a further 34,000 set to join that number within the next two years. Unless there is a large leap in the population over the next few years, there will continue to be a glut of properties.
As for commercial properties, the situation is looking even less rosy. Over the next year, the available office space in Dubai is predicted to double. Colliers are not too optimistic about any recovery happening any time soon, believing that when it comes it will be long and slow. They do not yet see any economic indicators that would suggest a recovery is on the horizon of the sort required to kick-start the real estate or construction industry. The fear is that price reductions in the arena of commercial real estate will end up being worse than in the residential sector.
Like so many places that had experienced a property boom over recent years, Dubai’s market began to stagnate last year after a six-year growth period. This led to the delay or cancellation of projects worth billions of dollars.
Despite the many well-known and much-lauded real estate projects in Dubai that may still make it appear a boom town – including the three palm-shaped artificial islands built by the developer Nakheel – this is now a false impression. Of those three islands, only one has been completed and the others have now been put on hold. Another development of islands in the shape of a world map has also seen work cease.
One can only wonder how those speculators now feel who bought property just before the crash. Some may not live to see their money back, let alone a profit.