It’s official! Dubai has lost its bubble and investors are scrambling to dump their real estate assets to minimize their losses. The mood is gloom in the emirate as more and more developers are laying off people by the minute.
Reports of panic in the market have surfaced and Bloomberg announced that classified ads were reading like an obituary for the real-estate market in Dubai. The very same market which seemed immune only a few months ago against the global credit crisis.
Some bankers even believe that Dubai’s property prices could fall by 80 percent in 2009, taking it back to 2007 price levels. Signs of trouble have also been recorded on the classy Palm Island development where rich investors complained about the lack of quality in their sand on their artificial beaches. Another issue is the lack of water that circulates the palm fronds of the palm shaped island.
Naturally, this is understanding given the fact these people paid millions for their investments. Another thing that has existing investors livid is the fact that prices have been cut by 40% since September. Imagine you paid full price!
Further to this, shares in the local property firms have lost 80 percent of their value since June this year.
With the slump in oil prices and credit being scarce, not many are positive about the Dubai real estate market right now. There are simply too many dollars in the game to close an eye and hope for the best. What many don’t know is that Dubai owes some $80 billion—148% of GDP to Abu Dhabi and the United Arab Emirates.
Christopher Davidson, a professor of Middle Eastern affairs at Durham University in the UK and author of “Dubai: The Vulnerability of Success” (2008, Columbia University Press) said,
“Dubai is more precarious than it has ever been, if the property industry collapses in Dubai, it will be finished. Dubai’s relative autonomy will come to an abrupt end. The emirate’s push into luxury property developments and tourist attractions was diversification on “paper sand,”
The property bubble in the desert emirate, home to the world’s tallest building, most expensive hotel suite and largest manmade islands, is bursting as scarce credit and slumping oil prices have international investors scurrying to dump assets. That may shatter Dubai’s goal of creating a sustainable economy by building the Persian Gulf hub for finance and tourism, forcing it to depend on oil-rich neighbour Abu Dhabi for financing.
Some reckon that real estate prices will drop a further 20 percent. Even Nakheel PJSC, the Dubai state-owned developer of three palm-shaped islands in the Persian Gulf, said last month that they were scaling back some of their projects worth $30 billion. This includes the widely celebrated 62-story Trump International Hotel & Tower near the Mega Yacht Club on the tree trunk of Palm Jumeirah.
