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Dubai Real Estate Market

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Submitted By kneeraj
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Dubai Real Estate Market- Steeper the growth faster the decline
I still remember the difficulties I faced in finding a house for rent in Sharjah (one of the Emirates of UAE and a neighbouring city of Dubai) in 2007. The rent prices were shooting every day and real estate agents were ecstatic to tell this news to the tenants. I was really contemplating my decision to move to a place where cost of living was rising every day.
When I saw Dubai first time, I was really amazed by the development of the city. It takes a lot of Will power to develop a city like Dubai in desert. The plan of action for development of Dubai was to initially invest in its infrastructure and set a platform for further investment. Dubai has given favourable business condition including tax free environment to invite foreign investment and foster its growth. From 2002 to 2008 the demand for real estate increased because of growth in per capita income, increase in foreign investment, easier availability of credit from bank and on a perception that price of unit will rise further seeing the past trend. These factors shifted the demand curve of Real estate to the right. During the same period, supply was inelastic until increase in number of suppliers into the market and ease of capital availability for construction projects. Nevertheless increase in supply never matched the increase in demand and supply shortage further boosted the price. At each price there were enough buyers available in the market and increase in price was not affecting the demand. The demand of real estate became price Inelastic.
But not everything went as per plan for Dubai. Since end of 2008, collapse of Lehman brothers and subsequent global financial crisis severely weakened economic activity in Dubai. GFC caused massive cut in foreign investment which resulted in loss in economic activity. As a result jobs have been cut

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