We’ve been speaking to our friends who are long-term residents in Dubai again.

According to word at ground level the number of expat families that have quit Dubai due to job loss over the past year and a half is around 60,000 already, and the pace of departures has been steadily picking up speed over the last quarter.

The advertising and construction industries are amongst the hardest hit. Last month Nakheel cut 500 workers, and in November Damac dropped 200.

We hear, though not through official channels, that as of this week, upwards of 1000 families per day are going home after losing visas, mostly back to the Indian subcontinent.

The Dubai system is pretty efficient at both ends of the job tunnel. When you first get a job offer then work permits are usually arranged quickly by the employer with minimal fuss. Once you lose that job though, the process is just as efficient. You are given a one month grace period to find another job. After that your “bataqa” (work permit) is withdrawn and you’re on the next flight out. If you delay then you get charged a fine by the hour!

This policy is implemented strictly and robotically. We have a personal story which illustrates this quite well – some years back an uncle of ours who had spent 26 years working in Dubai (without acquiring citizenship rights even after 26 years and kids having been born and brought up there) had to leave with his family after his job as an accountant ended due to retirement. His outbound plane was delayed by 3 hours. The officials at the airport made him pay a fine!!

Business tip – check the Govt car auctions

'the Dubai Job' - starring Michael 'expat' Caine

In many cases these loans have been guaranteed by their sponsors, the companies employing them, and they are left to foot the bill. However with companies themselves going bankrupt an increasing amount of debt will be now written off or given to debt collectors to chase, even around the world if the absconder hails from a country with information-sharing links.

Although the number of absconders is already way higher than its ever been, at present its mostly single guys and bachelors who are bailing out. Once the school year ends in the UAE it is likely that there will be another large wave of people skipping, this time many will be families. Families mostly pay school fees up front for the year, so any hard up families contemplating leaving Dubai in this way may well wait until the summer before they uproot.

kitne ka kiya?

Often the mechanics of such ‘hits’ was an individual setting up a legitimate business in Dubai, usually a shop. The shop would trade for some time and gradually build a credit line and accumulate large stocks in the warehouse, perhaps in the millions. Then one fine night the proprietor would call in black market specialists who would happily buy the stock in cash for a bargain price, still leaving the proprietor with an enormous profit. He would then cut and run in the night, leaving an abandoned shop to be discovered the following day!

Health warning – Property losses causing Heart-break

More from our pal in downtown Dubai who is awaiting heart surgery.

His essential, though not emergency, operation has now been put back for the fifth consecutive time by surgeons who have had a sudden increase in their workload. He has been told by the apologetic doctors that there has been an unprecedented number of men who have suffered massive heart attacks requiring emergency bypass surgery after losing in some cases many millions of AED in the property market!

This is both sad and stupid at that same time. Did they really think the market would go up forever and that making money was so easy and risk free? Yes, we’ve heard the adage “You have to speculate to accumulate” but someone should have told them another one: “You don’t speculate with money you cannot afford to lose.”

These wise words are worth remembering for anyone contemplating getting into the market at this time.

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.