Dubai Property Market Preparing for the Worst

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Written By Hossein Soltani

Property crash DubaiDubai’s property investors are historically among the most greedy (and perhaps slightly deluded) in the world, and now they are bizarrely demanding higher yields from their investments. This demand comes despite a slow in the UAE’s economic growth and an indifferent approach to real estate deals – both rental and sales – from the expat community.

The value of the property deals completed during 2014 in Dubai dropped by 7.6% year-on-year, a trend which looks set to continue this year too. Sensible investors have noted that residential investment is unable to sustain its over-inflated value for much longer, and as such are looking to commercial developments such as malls and hotels for better returns. All this, combined with a massive 175 real estate development liquidations last year (abandoned projects) mean that a crash is on the horizon.

Property Crash to Come

Real Estate experts across the Emirate are cautiously optimistic about how severe the inevitable property crash is going to be this year. Back in 2008, property prices were slashed in half following the bubble burst, and with the prices approaching the same level they were just before that crash, some are predicting something very similar to happen during the course of 2015.

Dubai relies heavily on investment from the Gulf region, and with the huge slump in the oil price, those who were formerly happy to pump money into the property market in Dubai will most likely be keeping what available capital they have in their pockets this year. The knock-on effect of the oil price really affects everyone.

Expo 2020 Will Save Everyone!

Dubai is still submerged in massive debt to finance some of its most ambitious projects, and most concerning of all to industry experts is the level of financing it requires to lay on the Expo 2020, an exhibition which is largely believed to be the answer to any investor uncertainty in the future stability of the emirate.

The Expo is a very difficult event to realistically quantify. Outside of Dubai, it is not really known about, and as such, the 25 million tourists who are predicted to come to the Emirate specifically for the event does seem an ambitious figure. This year when Milan hosts its own Expo, perhaps the realistic figure will become more apparent.

Keep the Customers Satisfied

Long term tourism is a vital source of income too, and with a strengthening dollar and exchange rate volatility, less people are likely to wish to part with the exorbitant levels of cash required to come to Dubai, rather heading for the similar climates and much more tourist-friendly areas of Greece, Spain and Portugal.

The Gulf region, so dependent on oil for its prosperity, must face up to the fact that it can’t rely on this anymore. Much hard work lies ahead for the Arabs to try to establish themselves in alternative sectors, and although Dubai has made great strides in attracting top US, UK and European businesses to come to the Emirate, should the faintest sniff of a similar crash to the one witnessed in 2008 come across the air, not many will waste any time in booking the first plane out of here….