Homes in Dubai now 48% off their peak

By Adam Schreck  |   2009-8-4  |     NEWSPAPER EDITION

A widely watched index of Dubai property prices shows home values have plunged by nearly half from their peak last year, making the once-booming Mideast city one of the worst casualties of the housing bust.

Colliers International said yesterday that prices in the sheikdom shed 9 percent of their value between April and June, putting them 48 percent lower than in the same period a year earlier.

Prices have now tumbled by half from their peak in the third quarter of 2008. A rebound to those levels is unlikely to occur anytime soon, Colliers regional Director Ian Albert said.

"The key factor that will really dominate Dubai's recovery will be the global economy, because we are really integrated into that," he said. "Dubai's recovery as a business hub will depend on what's going to happen in Europe and the US."

The rapid drop leaves homes in Dubai - many bought as investment by wealthy foreigners - worth what they were two years ago.

Some of the reasons for the slide will be familiar to homeowners in the United States or Europe. The availability of financing has become significantly harder to get as a result of the financial meltdown.

But other causes are more localized. Colliers cites job concerns among expatriate workers and a lack of transparency about construction delays as factors hampering the market's recovery.

As many as nine out of 10 Dubai residents are foreigners whose residency permits are contingent on continued employment in the emirate.

Builders have responded to the downturn by canceling or delaying billions of dollars' worth of property projects, putting thousands of employees out of work.

Analysts at Egyptian bank EFG Hermes predict that Dubai's population will shrink by 17 percent this year as foreign workers lose their jobs and head home.