In the worst case scenario for the coming year, UAE Investment bank Shuaa Capital reckons that real estate is heading for up to 60% falls by the end of 2009, after which they should begin to stabilise at the new lower level. The bank reports that property in some parts of Dubai has already plummeted by 40%. It says rents could fall by 20% up till 2011.

hundreds of work permits being cancelled daily

With companies actively shedding jobs and anecdotal evidence suggesting 1500 work permits and visas being cancelled daily, the Dubai population is set for a 5% shrink in 2009 according to Shuaa, meaning demand for both rental and owner-occupied property is headed decidedly in one direction. Add to that the spectre of home buyer residence visas being cancelled and the supply of mortgage funding drying up and you can see their point!

Swiss Bank UBS thinks a 8% contraction in the population is likely to be nearer the mark, blaming the downturn in the construction and real estate sectors. Hardly a revelation.

The Q4 2008 House Price Index (HPI) released by Colliers International last week (which is culled from actual mortgages completed by members HSBC, Barclays, Amlak, Dubai Islamic Bank, Emirates NBD and Abu Dhabi Commercial Bank) showed that Dubai property prices on average fell 8% in that period. This was on the back of a 45% drop in transaction volume in Q4. Prices of Apartments fared worst, notching up an 11% fall. Townhouses and Villas recorded 1% and 3% falls respectively. Despite this drop however, anyone who bought a year previously in Q4 2007 is still looking on average at a 59% capital appreciation.

The conclusion? Well you don’t need a degree in finance, or a highly paid job in an investment bank to know that the boom era of Dubai is well and truly stalled. How big or protracted the correction will be, no one really knows, neither Shuaa, nor UBS, nor HSBC or the others. No amount of analysis in the world can predict to a percentage or to a time as these banks profess to do. In the end the factors are too complex and changeable.

In the end each individual must guess for themselves when it is the right time to get back into Dubai property. Treat all news, analysis and forecasts with a discerning and critical eye. Never be a slave to them as they invariably trail behind the market trend rather than predict it in advance.

If you are in the ‘Dubai is a long term play’ camp then you trust that the rulers of the emirate are hardly likely to allow their grand experiment to fail and with the status of Dubai as the major business and tourism hub of the Middle East, it will be worth your while to stay in the game if you can manage to secure funding.

On the other hand if you feel the omens (and your gut instinct) are telling you to keep away then do not let the spurious ramblings of young investment banking analysts sway you. History shows they are usually wrong. With often conflicting analyses, some of them by definition will be wrong in any case.

All we do know is that the current climate of constrained money supply is the key factor in this global downturn. Despite the greatest desires of the Dubai authorities, Dubai will not be immune to these factors since they affect the core drivers of the property market, namely the individuals who need mortgages to purchase, and the companies who need finance to thrive and recruit in the area.