Dubai Downfall
The population in Dubai is likely to decline by 8 percent this year, due to recession in property sector, according to a new report.
The report, released by the UBS Investment Bank indicates a drop in population by 8 percent this year, which in turn would result in an oversupplied market, leading to 30 percent fall in house
prices within next two years.
The researchers at UBS Investment Bank, in their report, mentioned that a slowdown in housing market, apart from the challenging macroeconomic conditions, may result in decrease in the number of foreign workers moving into the region for job purposes, and fewer investors being involved in local investments, including real estate.
With reduction in sales, property companies in Dubai, and in other emirates have been laying off staff, reducing marketing budgets and delaying projects. This in turn, has affected all major businesses, including construction companies, advertising firms and contractors.
According to the report, in case the property-related labour force dropped by 20 percent this year, and by 10 percent next year, this would result in a housing surplus of 87,000 units, which constitutes 27 percent of total stock in Dubai, towards end of the next year.
Such a situation would result in 30 percent decline or may be more than 50 percent decline, in prices, the report stated.
Dubai is getting more vulnerable to the recession in property sector, than in other emirates, mainly because of the major construction works happening here, and due to the fact that more than 50 percent of its economy is involved in property sector, the report said. On the other hand, its neighboring emirate Abu Dhabi is already witnessing an undersupply of housing, and the economy there is dependent on petrochemicals, and hence, may be less severely affected than Dubai, the report said.
The UBS researchers have recommended that the Dubai Government pass should pass regulations that make life easier for laid-off expatriates to continue their stay here, while looking out for new jobs, as maintaining expat population is critical for long-term property market and economic sustainability of Dubai, the report concluded.
http://www.estatesdubai.com/2009/01/dubai-more-vulnerable-to-real-estate.html