What with the pain felt by so many during the housing crisis, we can be forgiven for forgetting that it wasn’t just the US that hit rock bottom. Dozens of countries around the world saw their real estate markets fall into despair as the financial crisis took hold around the globe, and perhaps none felt it quite so badly as Dubai.
When the recession hit the Middle East in 2008, Dubai’s main stock market lost almost three-quarters of its value overnight, exposing its red-hot real estate market for the bubble that it really was. For the last four years, Dubai’s real estate sector has remained pretty flat as cautious investors lick their wounds.
But signs of a recovery are beginning to emerge, with recent months showing some clear indications that investor’s confidence is slowly returning. Several of the emirate’s hardest hit companies have made progress in restricting their debts, property prices are finally on the rise, and even there’s even a steady stream of tourists trickling through the door. All of these indicate that Dubai’s real estate market is finally regaining its health.
“The downturn is almost over and the only way to go is up,” says investor Mohammad Jamal in an interview with Reuters. "Things are not back to how they were in 2005, but they're better than 2008."
Jamal is just one of a number of investors on Dubai’s stock market who ditched real estate and local stocks in favor of the international commodities market following the crash. But recently, he’s tentatively made some moves back into local stocks and real estate.
The potential is there for all to see. While Dubai’s stocks remain way below the level they were at pre-2008, its main index recorded a 19.9% gain in 2012, while it’s already up by 7.3% this year. This fledging recover has put Dubai’s stock market onto a stronger grounding than it has been at any moment in the last five years.
There are a number of underlying factors that have brought about this boost in investor confidence. For one thing, Sheikh Mohammed bin Rashid al-Maktoum, the ruler of Dubai, recently announced plans to develop the enormous Madinat Jumeirah tourism and retail complex that will include the largest shopping mall in the world. Meanwhile, in neighboring Abu Dhabi (the second ‘big’ emirate), the government has proposed a merger between its two largest real estate developers that many predict would also benefit Dubai.
Another positive sign was the calm reaction of investors to the news that the UAE’s central bank intended to place restrictions on mortgage lenders, in order to prevent a new property bubble from forming. Emaar Properties, Dubai’s largest developer, saw its stock price drop slightly following this announcement, only to recover quickly and rise to 8.8% more than its value at the end of last year.
No one is expecting Dubai to reach the astronomical level of growth it saw around 2005-06, but then no one really wants it to. Instead, Dubai’s investors will be satisfied if only the city can regain its status as the region’s healthiest economy once again – something that it certainly looks capable of doing.