Dubai in freefall - where will it stop?

A short time ago, Dubai was the location to invest in property. 15% of all cranes in the world were in use here as the state turned into the biggest development site on the planet. Projects of astounding proportions were underway.
Yet all this has come crashing down. At a time when there is talk in the West of the "green shoots" of recovery, is this once star player of the property market still barren ground?

By Mike Stock

Property prices in Dubai suffered the second biggest fall among worldwide markets as a result of the economic crisis, dropping 32% in a one year period. The only country to show a bigger drop was Latvia.
Dubai had been the best performer in the first quarter of 2008, but the whole of the economy is now struggling with many companies, particularly in the property business shedding employee's en mass. Expats have been exiting the country in droves and leaving behind their debts as well their lease cars at the airport.

The new Trump International tower and Hotel is a prime example of what is happening to developments here. It was to be the first in the region for the global property entrepreneur and was to stand one kilometre high and be complete with its own private beach, yacht club, tennis courts, gym, pools and gardens. This development has now come to a standstill and the site has been levelled. The project has been suspended indefinitely. Developers are in serious trouble and investors who were looking to make a quick profit can now only hope that their properties will be completed.

Not surprisingly, with companies laying off employees and a general downturn in business, property rentals have dropped considerably too with commercial rent down 18% in the first quarter of this year.

So, is it all doom and gloom for Dubai? Not according to HSBC. In a just released report, they say Dubai is starting to bottom out as prices stabilise, but values could still fall further as more properties come onto the market. There has even been a rise over the past months although prices are still some 23% below where they were this time last year.

But the bank warned that, with the school year coming to an end in June and more supply coming on the market, there could be renewed price weakness and a further slump in sales could bring prices down further. It might not be until 2011 that we see this market start to really recover.

So, for the forward thinking investor, is it a good time to start looking for cheap investments in Dubai? When you take into consideration that the first property auction to be held there did not manage to sell one single property, you have to think that either vendors are still holding out for too much, or that the general consensus is that price are looking to fall further....

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