Shadows of 2008 haunt Dubai's real estate market

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The construction companies in Dubai are not stopping in their plans despite expectations of a further fall in real estate prices this year. Industry consultants say structural changes in the market, such as tighter regulations, fewer speculators and developers, should ensure a smoother market this time around.

Others, however, fear the impact of falling oil prices and wonder how all the announced projects will be financed. Property prices in Dubai have been more volatile over the past decade than in other centers.

An assessment by Cluttons shows that Emirati home values fell by 50 percent from their peak in the third quarter of 2008 to mid-2009, then began a second downturn in early 2010. Prices then began to rise from 2011, with an infusion of funds and fugitive people from the Arab world causing housing values to rise to 18% of their 2008 peaks. However, values have declined again since the end of 2014.

Cluttons estimate that they fell 3-5% in 2015 and forecast a similar fall this year. CBRE says prices fell by about 15% last year and predicts another 10% decline in 2016.

These figures have had little impact on developers, however. Dubai's largest independent construction company, DAMAC Properties, also says it has not slowed down construction due to demand. Government officials also remain optimistic about economic growth in the Emirate, which is diversified, particularly in tourism.

Most analysts predict that holding Expo 2020 in Dubai will help stabilize the real estate market over the next 12 months.