2009 Dubai housing crash was a major economic crisis that hit the

Emirate of Dubai The Emirate of Dubai is one of the seven emirates of the United Arab Emirates. It is the most populous emirate of the UAE. The capital of the emirate is the eponymous city, Dubai. Governance Dubai is governed as an absolute monarchy by the A ...

, one of the seven emirates that make up the

United Arab Emirates The United Arab Emirates (UAE), or simply the Emirates, is a country in West Asia, in the Middle East, at the eastern end of the Arabian Peninsula. It is a Federal monarchy, federal elective monarchy made up of Emirates of the United Arab E ...

(UAE). The crisis was sparked by the

2008 financial crisis The 2008 financial crisis, also known as the global financial crisis (GFC), was a major worldwide financial crisis centered in the United States. The causes of the 2008 crisis included excessive speculation on housing values by both homeowners ...

, which severely impacted

Dubai Dubai (Help:IPA/English, /duːˈbaɪ/ Help:Pronunciation respelling key, ''doo-BYE''; Modern Standard Arabic, Modern Standard Arabic: ; Emirati Arabic, Emirati Arabic: , Romanization of Arabic, romanized: Help:IPA/English, /diˈbej/) is the Lis ...

's economy, particularly its real estate sector. The crisis was caused by several factors, including

oversupply In economics, overproduction, oversupply, excess of supply, or glut refers to excess of supply over demand of products being offered to the market. This leads to lower prices and/or unsold goods along with the possibility of unemployment. The ...

speculation In finance, speculation is the purchase of an asset (a commodity, good (economics), goods, or real estate) with the hope that it will become more valuable in a brief amount of time. It can also refer to short sales in which the speculator hope ...

, and

easy credit Predatory lending refers to unethical practices conducted by lending organizations during a loan origination process that are unfair, deceptive, or fraudulent. While there are no internationally agreed legal definitions for predatory lending, a 200 ...

Background

In 2006-2007 Dubai's economy was actively developing, driven largely by its real estate and construction industries. The government of Dubai had invested heavily in

infrastructure Infrastructure is the set of facilities and systems that serve a country, city, or other area, and encompasses the services and facilities necessary for its economy, households and firms to function. Infrastructure is composed of public and pri ...

projects, such as the

Palm Jumeirah The Palm Jumeirah is an archipelago of artificial islands on the Persian Gulf in Jumeirah, Dubai, United Arab Emirates. It is part of a larger series of developments called the Palm Islands, including Palm Jebel Ali and the Dubai Islands, ...

and the

Burj Khalifa The Burj Khalifa (known as the Burj Dubai prior to its inauguration) is a megatall skyscraper in Dubai, United Arab Emirates. With a total height of 829.8 m (2,722 ft, or just over half a mile) and a roof height (excluding the antenna, but inc ...

, the tallest building in the world. In addition, Dubai had become a hub for international business and tourism. However, the

had a severe impact on Dubai's economy. House prices in the Desert Sheikh fell an incredible 40% in the first three months of 2009, outpacing the fall anywhere else in the world after the investment bubble burst. The crisis led to a decrease in demand for property in Dubai, causing property prices to fall. This decline in property prices led to a chain reaction, as many investors who had purchased property in Dubai using loans were unable to repay their debts, leading to defaults and foreclosures.

Causes

Oversupply

Dubai's real estate market had become oversupplied, with a large number of new properties being built to meet the increasing demand. However, during the

, demand for property in Dubai decreased, leading to an oversupply of properties that were difficult to sell.

Speculation

Many investors had purchased property in Dubai with the intention of selling it for a profit. This speculative buying led to a real-estate bubble, which eventually became unsustainable.

Easy credit

The availability of easy credit had led to a large number of people taking out loans to invest in property. However, with the decrease in demand for property, many investors were unable to repay their debts, leading to defaults and foreclosures.

Impact

Property prices fell by as much as 60% in particular areas, and many investors who had purchased property with loans were unable to repay their debts, leading to defaults and foreclosures. The crisis also had a ripple effect on other sectors of Dubai's economy, as businesses that were dependent on the real estate and construction industries also suffered. The Dubai government was forced to take measures to address the crisis, including providing financial support to developers and implementing regulations to prevent oversupply in the future. The crisis led to a renewed focus on diversifying Dubai's economy, with a greater emphasis on sectors such as tourism, trade, and finance. After the collapse of the real estate market in 2009, various reforms were carried out in Dubai, including tightening credit limits for buyers.

References

{{reflist 2000s in economic history 2009 in economic history Economic bubbles Financial crises Systemic risk