Property Crash!

In 2008, the global credit crunch had arrived. Dubai’s two largest mortgage companies, Tamweel and Amlak, stopped offering loans. Both accounted for more than half of all mortgages. Foreign investors started to leave and number of properties bought had nose-dived. Number of foreign ownership in 2010 had decreased by half when compared to 2008.

A weakness of Dubai's governement is its inability to control for its own monetary policy as its interest rates were pegged against the dollar so when the Federal Reserved decreased its rates, inflation in Dubai soared to 13%!

In 2009, Dubai World, a state owned real estate company behind the property expansion, announced to its creditors it had problem with its debt repayments. This news caused shockwaves which accelerated the decrease in prices.

Around 50% of real estate properties, summing up to £400bn, have been put on hold or cancelled.

Residents living on Palm Jumeriah, which is also home to celebrities such as Michael Schumacher and David Beckham, have seen their apartments or villas drop by 60% in a couple of months.

Investors struggling to meet their debt payments have been trying to sell their luxury cars. Under Dubai’s strict law, if one defaults on its debt or a cheque is bounced, they will be sentenced. Therefore any expatriate in financial trouble will most likely flee the country taking the next available flight home

The government has admitted it now has one of the highest levels of debt per capita in the world! 

A more detailed impact of the people of Dubai can be seen in this video link