Everything’s falling- property, prices and people
A report released by EFG-Hermes says that Dubai’s population may decrease by as much as 17 percent in 2009, and the rents may fall by 50 percent.
March 29, 2009 1:57 by Aarti Nagraj
Reports from banks and investments houses have now become a common affair in the region, and while details vary, most are currently predicting a dismal outlook for the future.
EFG-Hermes latest report is no different: “We expect a sharp deceleration in private consumption growth, lower tourist arrivals and lower retail spending, resulting in an overall weaker economic outlook [for Dubai],” it says.
The report also quantifies the exodus of expatriates from the emirate that media reports have alluded to: “We forecast negative net population growth in Dubai in 2009 with the population declining to 1.49 million from 1.79 million in 2008 (17 percent decline).”
The reports attributes the fall to a sharp (30 percent) drop in the number of construction workers and all real-estate related and financial services sectors.
The summer of 2009 will be a key period, says the report, because a number of people who lost jobs in the beginning of the year are staying on to allow their children to complete the school year, and will leave once the term ends.
The report also addresses Dubai’s falling rental prices, and says that the rates could fall by up to 50 percent this year depending on the location.
Residential property prices have also dropped: “We estimate that residential prices in Dubai have dropped 34 percent on average since their observed peaks in 2008. We believe there is further room to go, with an overall price decline of 50-60 percent possible, suggesting that prices could drop on average another 20-30 percent before the market hits rock bottom,” it says, adding that the situation will improve and stabilize by the end 2010.
“We believe that 2009 and even 2010 will be tough years for Dubai,” it says.
The report also says that “there is no band aid solution” for the current real estate situation in Dubai, and that apart from the financial crisis, a number of other issues have to be resolved for recovery.
Some of the suggestions given by EFG- Hermes include generating liquidity in the market, legal improvements (clarity on new and old laws), structural reform (federal development plan and setting up a task force) and transparency.