House prices on the Palm Jebel Ali, second largest of Nakheel’s palm-shaped islands, have fallen by as much as 40 percent in the last two months as the global financial crisis sees foreign investors move to liquidate assets in Dubai, according to three Dubai-based real estate agents.Dubai has experienced the greatest real estate bubble in recorded history. Hundreds of thousands of speculators, primarily from Europe and the Middle East, will be wiped out over the next 2 years. I think that prices in Dubai will drop 90% from peak value. Yes, that is my prediction. And due to substandard construction, many of these glittery buildings will be essentially worthless. (More on this issue here.)
Not only will this devastate the speculators, it will cause a great deal of peripheral damage. Those construction workers will go back to Pakistan and India without any more pay checks. Construction firms, engineering firms, architects, steel manufacturers... the world's largest building site has just shut down. I said on Thursday what this will do EADS.
To get an idea of the sheer size of the Dubai real estate mania, check out this page of current and proposed projects.