The Role of Global Crises in Real Estate Market Recession Case Study of Dubai Residential Real Estate Market
The global economic crisis which started at the United States of America in July 2008 had its implications to the rest of the world. Due to globalization the worlds economies are interconnected and the collapse in one major economy will have to be felt by the other nations. Although many believed that Dubai was immune to the global economic meltdown, it was only a matter of time before the reality struck them. Dubai, a country in the gulf region had been enjoying a period of economic prosperity for the past years. Among the many contributors of Dubais economy is the real estate market which contributes around 20 of the Dubais gross domestic product. Major pain buffeted Dubai when their real estate market was adversely affected by the global financial crisis.
1. Introduction
The following chapter introduces the main topic of the research and informs that the dissertation aims to explore the impact of global financial crisis upon the real estate sector of Dubai. The chapter presents the overview of the entire dissertation and provides an insight over all the prominent features of the research study. The background research, problem statement and the research hypothesis are described in the chapter to explain the main theme and subject of the dissertation. The link between the financial instruments and real estate sector are explained in the chapter and it is also explicitly defined that how the dissertation aims to explore the impact of the global financial crisis upon the Dubai real estate market. Furthermore, the research approach and method employed for attaining the described objectives of the research are also included in this chapter. It also informs about the expected outcomes and results of the study to prove the significance of the subject matter.
1.1. Research Background
The real estate markets are directly linked with the financial stability and capabilities of a society because the financial conditions determine the level up to which the people afford to invest in the real estate industry. When the people have different sources of finance in front of them they often tend to involve in a deal related with real estate. On the other hand, when people do not have finance and credit resources it becomes difficult for them to become active in the real estate markets. There are different financial opportunities like credits, loans etc that allow the people to purchase, renovate or get any property on rent and when these opportunities become rare, the people also show less interest in these activities. Thus, the growth and development of the real estate industry hugely depends upon the availability of adequate financial resources and the fluctuations occurring at the financial markets have a direct impact upon the situation of the real estate industries. Just like all other real estate industries, the real estate sector of Dubai highly depends upon the financial instruments that work for the provision of credits and loans for the buying and selling of the property and thus, the fluctuations in the financial markets are expected to have obvious impacts upon the Dubai real estate market (Galal, 2008, p71).
The year 2008 witnessed global financial crisis that triggered almost every sector of the economies all around the globe. Almost all of the sectors of the economy in all the countries of al the regions receive immeasurable impacts of these crisis. With no exception, the real estate sector also encountered very serious setbacks from this financial crisis. It is observed that all over the world the situation of the real market dramatically changed when the value and prices of the property started declining with high speed. In some of the countries like China and UAE, the real estate bubble also burst as a result of these crises. In USA also, this global depression because the real estate bubble burst because almost all financial instruments like mortgage, credit markets and others instruments, associated with the real estate industry were badly affected (Bill, 2008, p2).
Dubai government and private development companies have invested heavily on the development of man-made islands where they have been building luxurious residential and commercial real estates. The demand for these houses has been on the increase from both the locals and the international community. Many investors have borrowed against their assets and they are facing uncertainty as the value of the assets fall below the borrowed amounts (negative equity) those who had foreseen this had sold most of their property over a year ago. Dubais population is made up of about 70 of the people with Asian origin and 10 from Bangladeshi (Herzel H., 2008). The remaining proportion is made up of the locals plus other people from other regions of the world. With such a great number of immigrants, the demand for residential real estate has been enormous and it has been increasing over the period as more people infiltrates into Dubai with its increasing job opportunities due to the growing economy.
In terms of real estate business, Dubai has been selling like a hot cake. The government has been showing keen interest in executing and completing many projects and Dubais future has been looking bright. Investing in Dubais real estate had been every investors dream. This created an issue of high demand and low supply. Then came the financial crisis and the situation was reversed and there was low demand and high supply. The result of this was that the value of real estates went down dramatically. The future was no longer promising for real estate investors and many were willing to withdraw from the market. This adversely affected the real estate market (Herzel H., 2008).
The real estate markets of USA, China, UAE, Scotland, Singapore, Thailand, Japan and many other Asian countries are now going through a phase of downward spiral due to which there is soft demands for real estate in the country. The property prices have become very low and the people who have invested their money in the real estate markets are facing heavy losses. The companies both small and giant attached with the real estate sectors are also struggling with serious financial dilemmas because the banks are not open towards providing loans to them. The situation has now become worst for the real estate industry as a result of this credit crunch (Harry, 2009, p56)
The economists and experts believe that the US real estate sector will take long time to recover from the massive destructions brought by the global financial crisis. However the US real estate industry is not the only one to receive serious effects of the global crisis but all over the world, countries are witnessing critical impacts of global crisis upon their real estate industries. In many of the developing countries including UAE, Japan, China, India, Thailand and Israel the situation of the real estate markets has totally changed in response to the global financial crisis. In difference countries these crisis draw different level and intensity of impacts however overall all the situation of the real estate markets went down in different countries (Peter, 2008, p76).
This dissertation is intended to analyze the impacts of the global crisis on the real estate recessions in Dubai. In this regard, the dissertation strives to present an overview of the overall impact of the global crisis upon the real estate industry by briefly describing the effects of the global crisis on different countries real estate market recession. The dissertation then specifically focuses upon the Dubai real estate market and studies the impacts of the financial crisis on the buying and selling of the property in different residential areas of the city (Harry, 2009, p56).the dissertation attains its objectives by employing qualitative research methodology. Different journals, financial magazines, books, research reports and other related documents are accessed and studied to acquire complete information required to have deep insight of the issue. Furthermore, a statistical survey is also conducted among 100 residents and 100 real estate agents of Dubai to collect their opinions about the impacts of the crisis that was observed upon the real estate market in Dubai. All the collected data and information is then analyzed to present an overview of the impact of the global crisis on the real estate recessions in Dubai.
1.2. Problem Statement
The global crisis have drawn immeasurable impacts upon the world economies and experts commonly believe that it is hard to provide estimates about the negative consequences of the global crisis upon different sectors of the economies of different countries. The real estate sector also went down in different countries of the world as a result of this global crisis. In different countries of the world, the intensity of this crisis is different but almost all the real estate markets received negative impacts and went down. It is found that like all other sectors, it is difficult to find out the exact loss faced by different countries due to the recession of their real estate sectors. The related secondary material affirms that the impacts of the global crisis are clearly witnesses by almost all of the countries of the world and especially in some of the developed countries like China and USA these crisis resulted in considerable change of the situation of the real estate industry.
International Herald Tribune (2008) reported that in Dubai there is considerable change observed in the demands of real estate in the city because of global crisis. As the price of the oil went down, the economy also faces destabilization period. The banks are not giving credit to the people due to which the real estate markets are falling down. Galal (2008) also reported the trend of decline in the real estate demand across all the seven states of UAE. Novinite news Agency (2009) declared in a report that the Bulgarian housing market was the first market to observe the effects of the global crisis on real estate. The prices of the houses went down up to 20 percent in the first quarter of the year 2008 and the trend continued for the entire year. Chiu (2008) clarified that the response of Chinese real estate market was also negative towards the global crisis and substantial trend of prices decline was recorded in the prices of the real estate even in the major cities of the country. Tharachai (2008) revealed that the Thai real estate industry receive serious setbacks from the financial crisis occurred at international level. The economic conditions of the country became unfavorable for the real industry market because the banks adopted a cautious attitude in providing loans and on the other hand the real estate developers also became cautious in initiating new projects. The interest rate on loans was also raised due to which people found it difficult to acquire loan and make purchases in the real estate sector. The above mentioned examples and many others show that the real estate market has witnessed adverse effects of the global crisis all over the world. Though the intensity of these effects might be different in different countries but it is a fact that in all the cases, these effects are negative in nature.
It is observed that the crisis have negatively affected the real estate sectors around the globe however in different countries the patterns of the loss is different. Though, it is said commonly for all the countries that the real estate sector is affected badly due to the crisis but going deep inside the issue allow having understanding of the differences in receiving the impacts of the global crisis. To date, there are numerous analysis, studies and research reports published by different experts, social scientists and organizations to show the effects of global crisis on the real estate sector but there is very little work done to compare the effects of the global crisis received by different countries. As a result, it became difficult to conclude that how different countries real estate sectors have responded towards the global crisis. Thus, this dissertation, strive to provide answers to the main question how did the Dubai real market respond towards the global crisis
1.3 Research Hypothesis
This focus of the dissertation is to analyze the impacts of the global financial crisis upon the Dubai residential real estate sector. The dissertation aims to test the following research hypotheses
Hypothesis I
Dubai needs more than five years to recover from aftermaths of global financial crisis
The financial crisis hit the real estate venture in Dubai adversely.
Hypothesis II
The old government policies contributed to intense response of Dubai real estate market towards the Global financial crisis.
Hypothesis III
The buying and selling within the residential sector of Dubai real estate market is more affected from the global financial crisis as compared with other sectors of the industry
Hypothesis IV
The active role of western companies and investors in Dubai is the main reason behind intense response of the Dubai real estate market towards the global financial crisis.
1.4 Aims and Objectives of the Study
The main objective of the dissertation is to track the changes led by the global crisis upon the real estate markets of Dubai. The dissertation intends to examine the role of the global crisis in the recession of the real estate markets to point out if there are some other reasons also, that contribute towards this recession or the entire responsibility goes to the global financial crisis. Thus, the main objectives of the dissertation are as follow
To study the effects of global crisis to the real estate sector.
To identify the factors that play important role in this situation
To study specific incidences of the real estate industries of Dubai
To collect evidences from other countries about the effects of global crisis on their markets.
To present an analysis of the entire situation by explaining the response of Dubai real estate market towards the crisis.
1.5 Rationale of the Study
The study is based on the objective of identifying the factors that play role in the recession of the real estate industries all over the world. This study is based upon the case study of Dubai so that the impacts of the global financial crisis can be examined the residential sector of its real estate industry. Thus, the dissertation strives to explore the factors responsible for the recession of the real estate industry so that some workable suggestions can be put forward to improve the situation.
1.6 Expected Outcome of the study
Dubai being the thriving business hub on the Persian Gulf is being increasingly re-positioned as the IT centre of the Middle East. Many Information Technology firms as their Middle East regional headquarters have already chosen the city. The city possesses great economic and social value and it is important to explore the core issues related this global city.
It is expected that the research report will not only significantly contribute to the existing literature related with the same topic but it will also help in getting a deep insight over the issue. It is observed that there are several research studies conducted to study the overall effects of the global financial crisis and at the same time there are many research studies that are focused on pointing out the effects of the global financial crisis upon the real estate markets of any specific country. There are also some studies conducted to examine the effects of the crisis upon the Dubai real estate sector and in continuation to these researchers, this dissertation aims to discuss the issue in more detail and depth by providing an overview of the residential sector of Dubai real estate market and then the situation that evolved after the global crisis. Thus, it is expected that this dissertation will present the analysis of the entire situation from a different perspective and will unfold some important aspect of the subject matter. This dissertation will provide the necessary information to individuals aspiring to invest in the real estate and they will get assistance in understanding the present and future of the real estate markets of different countries. Furthermore, the students, general people and experts will also find this research study a useful tool when advancing on the study of real estate in Dubai or elsewhere
1.7 Research Approach and Research Methodology
A dissertation can present several types of research studies including exploratory, explanatory, descriptive or predictive. Each of these research types has its own importance and significance. While looking at the objectives and background of the dissertation, it can be said that the proposed research tends to be an exploratory and descriptive research study because with the help of both secondary and primary analyses and, the research study describe the past and present situation of the real estate industries and then it will explore the impacts of the global crisis upon this industry.
However, the quantitative research approach has also proved to be a significant research method but the qualitative research methods can serve best for the research study in attaining all its objectives the significance of the qualitative research methods is widely recognized by the social scientists. The availability of a wide range of qualitative research methods facilitate the researchers to conduct qualitative research studies by employing the most relevant and suitable research method as per objectives of the research topic. These different methods include case study, literature review, natural experiment, participant observation, interviews based, and secondary analysis of data or combination of these.
This dissertation also employs two research methods for conducting the study so that there could be deep understanding of the topic with the help of these methods. At first secondary analysis of data is conducting, accessing and reviewing the available secondary material and in the second phase will contain the analysis of data collected from residential sector of Dubai real estate market which will be presented to provide a complete picture of the real estates of the city and the impact of global recession. Both secondary and primary sources of data collection are employed for the study including secondary analysis of data and outcomes of the questionnaire from real estate agents and residents of Dubai.
2. Literature Review
2.1 Introduction
The chapter presents the detailed review of the related available literature conducted around the topic. Different secondary resources are accessed to gather the relevant authentic information for the research study and the review of this collected information is presented in this chapter to provide a complete understanding of the issue and to portray the entire picture in a very clear manner. The dissertation will present the discussion of the main issue and the comparative analysis of the real estate markets of three selected countries in the light of the following review of the literature. There is a wide range of information covered in the literature review, thus, for better presentation of this information, the chapter is divided in two different parts. The chapter explains the overall impacts of the real estate market on the real estate industry and then presents the overview of the Dubai real estate sector. Moreover, the chapter presents the review of the literature that explains the impact of global crisis upon the real estate market of Dubai.
2.2. Global Financial Crisis and Impact
The fall out in the US supreme mortgage lending is often sought as an important and underlying factor behind the recent global financial crisis. These crises were spread over all the other sectors of economy and market and result in the massive market failures and major regulatory weaknesses. The global financial crisis is also regarded as results of poor corporate governance and the incompatible executive structures. There was mismanagement of the financial instruments in many of the major financial giants. The experts argue that there was high level of lack of transparency in the trading procedures of many of the leading financial institutions of the country that finally take these companies and the entire economy towards global crisis. (Robert, 2008, p34)
The crisis was spread over different countries of the world very rapidly because in most of the countries there existed weak idiosyncratic rules that used to pertain the operations of the major trading instruments and the financial instruments. There was usually excessive risk raking by the banks as a result of poor capital regulations as well as inadequate accounting rules and the rating agencies were also supposed to be exempted from the jurisdiction of the national regulator that also became important responsible factors of the crisis. As a result of these flaws and many others that exist in the financial systems of US and many other countries, the global economy faced the international financial crisis that surrounded the global financial sector in September 2008 and cause mutual distrust between the core participants of the financial markets of the world. There was a complete breakdown of the short term financial transactions in the international financial markets that was subsequently meltdown in the security exchange companies of different countries of the world (Galal, 2008, p71).
These crises have drawn immeasurable impacts upon the global economy. At the same time, almost all the countries are also struggling with their domestic economic issues that turned out to be worst as a result of this crisis. The economic activities in all of the sectors have responded towards this crisis. The world economy witnessed the freezing of the interbank lending and money markets. The international analysts, experts and authorizes have shown their concerns regarding the solution of this problems and there have been some policies formulated and demonstrated that are aimed at resolving the wide range of problems led by these crisis. These policies and plans are basically aims at regaining and restoring the confidence in the international financial system (Davidson, 2008, p82).
This crisis hit the economies of the countries in many different ways. Almost all the sectors of the global economy received the impacts of this crisis because financial is the key instrument for all the economic activities. There was financial contagion and spillovers observed in many of the stock exchange markets for example the Russian stock exchange was enforced to stop functioning and the trading was twice stopped. The Indian stock market was also disturbed and there was fall of 8 percent at the same day of the plunged of US stock markets. The crisis also affects the trade operations as well as the trade policies of many of the developing and developed countries. For example, China and India used to import copper, oil and other natural resources from different African countries however, the demand of these products declines in these countries due to slowdown economic activities and in turn these countries have to cut down the amount of imports of several commodities and raw material from the other countries that they use in their manufacturing process (Peter, 2008, p76).
The crisis also builds up strong pressure upon the foreign direct investments and the equity investments. It was expected that after the record growth of foreign direct investments in 2007, the trend of FDI will get further momentum in 2008 onwards however after the crisis this rate is also slowed down and the equity markets came under pressure. The project finance was also weakened and many of the FDI project initiated in different countries were put on hold mainly due to unavailability of the adequate financial resources. In South African and India, there are many projects that are currently on hold as a result of the recent credit crunch. The commercial landing sector is one of the most important and leading receivers of the global financial crisis.
Due to the global economic interconnectivity, economic meltdown in one part of the world will definitely have an effect on the other parts of world. Among the sectors that were hard hit was tourism industry. Tourism industry has been very successful over the years employing so many locals and professionals from other countries (Herzel H., 2008). Dubai has great tourism attraction sites most of which are man-made sites. It has the most beautiful hotels and very tall buildings. Actually the tallest building in the world-Burj Khalifa is in Dubai erecting at a height of above 800metres above the ground. Due to this reason so many people have been immigrating to Dubai. This has created a very huge demand for residential housing. Most of the tourists who visit Dubai come from the European nations and America.
When European and American countries were hit by the economic crisis, it reflected that most of those people could no longer afford luxuries of tourism. Many people who have been saving for a holiday had to re-think their decision due to their reduced incomes. Industry reports revealed massive job cuts in Dubai hospitality and tourism industry. As a result of this, the demand for residential housing went down. Lay-offs in real estate outnumbered all other job areas in the city of Gold (Herzel H., 2008). Dubai could no longer demonstrate staying recession-proof in the global meltdown. Tourism industry which contributes a very great percentage of Dubais economy was among the hardest hit sectors. Many people in that industry lost their jobs and therefore they were not in a position to acquire new houses. Many people were operating at very low income levels and therefore they could not afford to stay in luxurious real estates. There were major movements as people moved from luxurious real estate to cheap houses due to their reduced incomes. As a result, the demand for real estates went remarkably down
In most of the developed and developing countries, the banks become unable to provide loans to the individuals as well as to the organizations in the manner as they use to provide them before. This is because due to global uncertainty, the investors are afraid of high risk prevailing in the markers. As a result there are limited investments being made by the investment giants in different countries. As the banks become unable to provide loans, all the related sectors are badly affects. For example, the real estate markets of most of the countries undergo recession due to the unavailability of the financial crisis. The real estate markets of most of the developing and developed nations are going through serious crisis. There are no adequate financial resources available in these countries that have slowed down the investments in the real estate sector. The prices of the property also went down in most of the real estate markets and the trend of property buying and selling is also proceeding with very low speed. There were many countries like UAE, China and Thailand that were witnessing high prices of the property before the global financial crisis however the bubble busted after the crisis and now these real estate markets are also witnessing the phase of recession (Peter, 2008, p76).
The global crisis have affected almost all the countries of the world, however, the developing countries were the main victim of the situation because the real estate markets of these countries are more affected by the crisis. For example, the real estate market of China is highly affected by the crisis. China is the most quickly economic growth country, china renovate itself as the fastest growing country in the constituency. Over the last two decades chine work hard to grow its development this is outstanding. China now ranks as a sixth largest economic country in the world. China has implemented a sequence of policies to the development of country. Chains real estate market is one of the strongest markets of the world. The market grows very fast because of remarkable changes made by the government controls and rapid development. The real estate market of china has been observing an extraordinary rate of growth in real estate, especially in the growing cities of china. In last some years china real estate market showed a trend of adjustment, there was insignificant drop in the growth rate of production and trades meter in real estate industry, but industry continued its growth fast. The central and western market of china was not suitably developed but markets prospective were high. Due to good and rapid policies of government the average profit of market will be reduce and average profit level in the industry will improve. The impact of the fast development of the economy and strong policies make by government has been considerable. (Lisa Chiu, 2008).
During the real estates boom prior to the global recession, the government had advised its locals to leave the public sector and join the private sector. Many people left the public service and joined the private sector and they faired on well until Dubai was hit by global financial crisis. Many of these people had joined construction industry in the private development companies. Many people lost their jobs in the economic downturn as the demand for houses decreased. To try and protect its citizens, the minister of finance issued a decree prohibiting the firing of locals. It therefore became so hard for the foreigners who were working in Dubai. Another law to make the foreigners lives harder was put forward (Property Digest, 2009).
This law stated that any company employing a foreign worker should notify the authorities and the workers bank should the employee be fired or laid off. This meant instant withdrawal of work visa and withdrawal of any credit. The person was then supposed to find another job or leave the country within 30 days. As a result many foreigners have been forced to leave the country due to these discriminative rules. Many foreigners lost their properties when the 30 days ultimatum ended before they could sell out their properties (Property Digest, 2009). All these people have been leaving those estates they have been residing in. This has played a very negative impact on the demand on the real estate market in Dubai. Many foreign investors have been forced to rethink their decision to invest in Dubai. The financial downturn has not worked very well for Dubai foreign affairs. Many investors changed their trading grounds to more favorable environments like China. Dubai has lost many of would be investors to other regions of the world. This has very adversely affected the real estate market in Dubai.
The real estate industry of China makes an example of growth in supply of real estate market, especially in the coastal cities of China, like Shanghai, Shenzhen and others. In 2005 invested in to the commercial and residential property increased by 21.9 which compared to 2004, also the total investment in real estate sector increased up to 68.3 from 67.2 in 2004. In 2006 the real estate sector of China has maintained a rapid growth. The sale of commercial houses in 2006 increased by 20.2 compared to 2005. With further improvement in real estate demand supply and the market structure, the house price in 2006 tends to be steady on the basis of 2005. The real estate industry is the most important and the backbone industry of China in comprehensive control the real estate sector have a tendency to develop progressively. According to a report studied by National Bureau of Statistics China, the real estate investment in China has reached at RMB 1575.9 billion in 2005, and RMB1.4 trillion in 2007_08. The growth of investment on real estate began to speed up and the ratio is increased on commercial buildings and affordable residential houses. It increases up to 1.9 percentage points which compared to the growth of the real investment at the same period (Lisa Chiu, 2008).
The law policy of 2007 targets the real estate market have been issued, which shows the exact policy trend for the development of the real estate sector, particularly the housing market in 2008 and onwards. Due to the accomplishment of the strict policy the real estate market of China would increase which will be positive sign for the reshaping of waste area. Due to the law policies and strictly implementation of them and regular increase interest, rate the business trundle will be speed up. Reason of that the stronger real estate companies grow and reach the high level. It shows the conditions were very encouraging in the real estate sector, however, after the crisis the industry responded and the situation become reverse, the prices bubble has burst and people face lots of problems in term of low prices and low demand of property.
2.3 Overview of Dubai real estate market
Dubai is the second largest of the seven emirates in the United Arab Emirates. It is a land of free trade and is very open to the foreign investments. Until 2002, only UAE nationals could own property in the UAE. But in May 2002 when Prince General Sheikh Muhammad Bin Rashid Al Maktoum issued a decree permitting foreigners to legally buy the property freehold in designated developments it set the stage for the real estate boom in Dubai residential property and Dubai became the first emirate of the UAE to get involved in freehold real estate. The purchase of property on freehold basis means the owner can sell, lease or rent hisher property at their own discretion. Property owners and their immediate family can obtain Dubai residence visa for life. Dubai is among the most successful real estate markets of the world. The city experienced an unusual growth in its real estate sector especially during the last five years. Dubai has a broad assortment of real estate to opt from ubiquitously when we look on it, the rapid pace of its growth and development is clearly visible in it terms of its large sparkling hotels and other wonderful residential and commercial buildings (Robert, 2008, p34).
Dubai is one of the leading lights in this sector too. The emirate is full of biggest. The worlds biggest airport is being constructed there, as is Dubailand, the worlds largest entertainment and leisure complex. All this activity comes from within an emirate blessed with a fortuitous geographical location, within a five-hour flight of 1.8bn people a quarter of the worlds population and a stable and liberalizing government that realized long ago the importance of diversifying away from a total reliance on oil (The Report Dubai, 2008).
As a country and destination market to enter, UAE is known as the 3rd best for business and services. The UAE is made up of seven Emirates which are crucial states united by a federal government which operates out of the capital, Abu Dhabi. Abu Dhabi and Dubai are the main economic contributors out of the seven emirates (formally known as the Trucial States) that make up the UAE. Non-oil revenues contribute 63 percent to the GDP. Abu Dhabi contributes 59 percent to the GDP of UAE (56 percent which is oil dependent) while Dubai contributes 29 percent (5 percent is oil dependent). Dubai contributes over 80 percent of the non-oil assets (Middle East Monitor, 2007). Dubai is very strategically placed. It lies at the confluence of the ME, Asia, Western Africa and CentralEastern Europe. It is in a bed of ancient civilizations, a birthplace of three major religions and a transit point for onward journeys and in todays economic climate, for ICT products and services
The economic model of the UAE and Dubai in particular has always been to exploit on areas where it has a location benefit (oil and gas) and re-invest the revenue generated from these sources, by way of venture capitalism and diversification, into the service based economy (The Report Dubai, 2008). The visionary role of the ruler of Dubai, Sheikh Mohammed, who runs the state akin to a corporation with him as CEO has done a lot to attract large MNCs from the world over to not only set up here and serve the domestic market but also to transform Dubai into the regions sales, marketing, services and logistics hub creating a regional center for excellence. Key to the success of Dubai is the nations efficient public sector and local government, minimal bureaucracy and a tax-free environment making it a very lucrative destination for MNCs to enter and profit.
As per the 2008 Emirates yearbook, the economic success of the UAE and Dubai can be accredited to the strong performance of oil over the past few decades, establishment of major infrastructure development projects and the further expansion of its free trade zones. The nominal GDP of the UAE grew by 23.4 percent in the year 2006 to reach AED 599.23 billion. Of this GDP 37.3 per cent was from oil and gas revenues while the balance of 62.7 per cent came from the non-oil sector. As per the IMF the UAEs economy grew by 9.4 per cent in 2006 and was amongst the highest in the world generating over 220,000 jobs. The following chart will highlight these achievements and also help us understand the input generated from the trade and services and IT sectors.
The establishment of free zone and Dubai international Financial center (DIFC) are two important landmarks that highlight the flourishing growth of the real estate sector of Dubai. The Dubai real estate has turn in to a most important magnetism for the global market. Dubai real estate brags amazing and very important projects such as The Palm and The World, which is the worlds largest artificial island complex, which is build up by villas, golf courses and holiday resources. In Dubai many astonishing projects are in process such as, The Palm The Eighth Wonder of the World and Dubai Marina that is the one of the largest artificial waters edge projects in the world. The world tallest building Burj AL Arab is complete whereas the construction of Burj Ul Dubai in on its way (Davidson, 2008, p82).
The ownership of residential as well as commercial buildings is an important issue for the investors and residents of the city. According to Dubai law no. (7) Of 2006 only the nationals and the companies of United Arab Emirates and Gulf Cooperation Council which completely owned by these nationals contain the right to have property in all areas of Dubai. On the other hand, the other nationalities and their companies have a right of a long term lease up to 99 years in some selected areas of Dubai. In May 2002, it was announced that residential apartments and villas are accessible for all ethnic groups on freehold basis. At present time the freehold property of Dubai is progressively valuing at the rate of 10-40 per annum. The non oil sector of UAE such as finance, real estate, hospitality and tourism, compose its 65 of GDP. Dubai maintains its self greed of gulf with the help of these non-oil sectors. Due to runniness of whole region, the real estate of Dubai has afforded a good speculation chance due to its doubling up property prices in the last few years. Dubai has become the fastest rising up holiday destination. There is heavy demand for the holiday homes and unfinished ownerships. Due to the movement of the multinational companies in Dubai in large numbers, the demand for commercial and investment land has considerably increased. The real estate regulations of Dubai have been positive from the investors point of view. The announcement of new property law and modifiable of the sale and lease of land and buildings to citizens and deportees get going the possessions detonation. These regulations diverge allow the foreign residents to purchase pasture properties in chosen areas (Edmund, 2008, p1).
In the thriving Dubai real estate market, migrant workers from Pakistan, Bangladesh and India went to Dubai to make a fortune. Dubai is an extravagant tourism and trade hub and a prime destination for unskilled labor. Migrant workers make up 95 of the UAE construction workforce. They work 12 to 14 hours and allowed a break time of one hour. The average incomes of these workers are less than 10 percent of the UAEs per capita income. They also suffer brutal exploitation and political suppression. These workers are at the mercy of labor contractors who often keep their passports with them and impose lower wages and worse conditions than they are originally promised. Strikes, protests or making unions is not an option for them. Workers put up with all these conditions because the jobs in UAE allow them to send remittance to their homes and to support their families. But the global financial crisis is adversely affecting the ability of those workers to support their families which makes them unwilling to accept the low wages and intolerable working condition. The cancellation or delaying of the construction work of various projects has affected these South Asian workers jobs and the remittances to South Asia have suffered (Harry, 2009, p56).
The well developed and mushrooming economy of Dubai has salivated over to the real estate market which has been bystander improved bustle with numerous schemes in the pipeline in the residential, commercial, industrial, and tourist segments. The growth of Dubai has been consistently resisting by all market analysts, it is seeing the last 5 years the market analysts predict that the real estate market of Dubai will not being beneficial so much but it is the fast that the bubble of it has no burst yet. Dubai was the first empire of the UAE who get engaged in freehold real estate, its the time when only UAE and GCC nationals were allowed to purchase property in UAE. In 2002 the government of Dubai agreed to allow foreigner to contain 99 years lease of particular property of Dubai (Amran, 2009, p1).
In May 2002, the government issued a ruling which allow foreigners to purchase property on freehold possession. This decree sparkle the real estate explosion in residential property in Dubai. According to that law the property is put in the name of the buyer and he has all rights to sell it or rent or lease it, also the buyer and his family will achieve Dubai residence vises for life. These freehold properties are limited to areas of Bur Dubai to the end of Dubai, some of these area contain Sheikh Zayed road, Jumeriah, Jebel Ali and Dubai Land. In Dubai so many residential projects are complete and some of them are under construction, the world largest man-made building Dubai Marina which is surrounded by worlds largest well deliberate waters edge expansion. This project was started in 1998 which imprinted beside a 3.34km extend of Dubais waters edge, it provide accommodation over 120 thousand people in their lavishness residence tower and holiday homes. Golf Tower in Dubai has two residential dwelling towers. Dubai was the first empire of the UAE who get engaged in freehold real estate, its the time when only UAE and GCC nationals were allowed to purchase property in UAE. A number of real estate developers has responded to this change and started to build large residential projects aimed at the foreign market. Now there is construction on a large scale which has made Dubai one of the fastest growing cities in the world. Owing to fast development in real estate Dubai has various building records such as the tallest tower (Burj Dubai), the worlds largest shopping mall (Dubai Mall), the worlds biggest fountain (Dubai Fountain). Also under construction is Dubai land which will be twice bigger than Walt Disney World Resort (Edmund, 2008, p1).
The real estate market of Dubai booms mainly due to the arrival of the foreigners of great numbers to the city. There are numerous reasons why foreigners are moving to Dubai. It is one of the worlds fastest growing economies having lots of opportunities for business and employment. Although it is an expensive city but it is cheaper compared to European countries except for the nightlife. Also all the emirates of the UAE are tax free. It is well known for its sound infrastructure and strict law enforcement, the crime rate is very low as compared to other populated cities of the world. Expatriates from around the world are moving in therefore it has a multicultural and cosmopolitan environment. Dubai also has worlds popular shopping centers like The Dubai Mall, Deira City Centre, Burjuman Centre, Wafi City Mall, Lamcy Plaza and many more. The city offers year shopping festivals throughout the year like Dubai Shopping Festival and Dubai Summer Surprises. Dubai Duty Free shops are also popular. The city also offers many recreational activities and has many historical buildings and sites, which attract tourists. Because of these attractions, the foreign people use to come to the city frequently and the demand for the property tends to rise (Peter, 2008, p76).
The policy of the government to allow the foreigners to acquire freehold property in Dubai was one of the transformational steps taken by the UAE government that made the real estate market of the city very hot and attractive for the investors from all around the globe. Very soon the city witnesses the rise in the prices of the property with high pace. The prices of the villas in many of the residential areas of the city were rose up to more than 200 percent whereas the prices of the apartments were also raised up to 100 percent. This rapid increase in the prices of the property made the property bubble that was backed by strong economic position of the city. Not only the prices of the property rose but at the same time there was massive rise in the rents of the apartments and villas. The rise in the demand of the property is also led by the fact that the population of the city is growing rapidly and with each new day many people from different parts of the world enter Dubai in search of different opportunities for their business and livelihood. These people need residence to settle down in the city due to which the demand for the residential property became very high. During last decade, the population of the city has almost doubled and it is expecting that in coming decade it will again increase with the same rate. This expected rate for the growth of the population is same for the demand for the property also because the growing population will need areas that are more residential.
2.4 Effects of Global Financial Crisis upon the Real Estate Market of Dubai
The global financial crisis shakes the real estate industries all over the world and with no exception, the Dubai real estate market also responded towards this crisis immensely. The real estate property developers of Dubai started to realize that financial crisis affecting the property market in Dubai after months of press releases stating that Dubai was immune to the global economic downturn. As a result Dubai is facing a slowdown in construction. The industry mood in the beginning of 2009 is quite in a contrast with the thriving start in 2008. Since the start of 2008 the prices of houses in Dubai increased by more than 60. This pattern also reflected in rental market. The extreme rise in prices and rents reflected an imbalance between demand and supply. The reason for such increases in the price may be the supply of apartments in the market was not enough to meet the increasing demands and increasing number of people searching for houses and apartments (Edmund, 2008, p1).
Dubai real estate market has had trouble due to unfavorable economic climate. Property prices are gone very low therefore Dubai real estate property is attracting the attention of local and foreign investors who are willing to gain advantage from this decline in prices, and its sound legislation and infrastructure. One of the investment companies, which are planning new strategies to invest in Dubai real estate, is Al Mazaya Holding Company. The Kuwait based Al Mazaya Holding Company purchases, develops, sells and manages residential and commercial real estate properties such as Deluxe Villas, Dubai land and high class residential buildings.
The problem for those house seekers increased as the dirham interest rate rose and it became harder to mortgage from banks. But as the global economic downturn hit the real estate boomtown, the prices of houses tend to fall. The investors became worried about the returns from their investments so they are desperately putting their properties on the market to sell which is categorized as Distressed Sales. Distressed sales have played a large part in various projects such as Dubai Villas, the prices of which are dropped down to 60. Prices in Dubai are still expected to fall by 30 further in this year. Distressed sales of residential property in Dubais booming real estate sector are increasing as some investors face financial problems and some projects are delayed. These real estate investors or owners are those who are short for their next payment or are seeking to recover their blocked capital or face possible repossessions by developers. So they are left with a choice of either defaulting on payments or making a distressed sale. It is also caused by delayed and slower-than-expected infrastructure development (Amran, 2009, p1).
The issue of the Dubai real estate response towards the global financial crisis is an important point of concern for the businesspersons, investor and residents all over the world and there have been many efforts done to understand the effects of these crisis upon the industry and to search for the ways through which these effects could be minimized. According to the panel of industry experts who attended the third not for profit Cityscape Connect Dubai business breakfast on June 2, 2009, the real estate and industry situation will start to get better sometime between the end of this year 2009 and the second quarter of the year 2010 as the Dubai real estate market is showing signs that the property prices are beginning to level off and the market is stabilizing after being hit by the economic downturn. Cityscape Dubai 2009 is the worlds largest real estate event, which provides platform for real estate experts for open debate. More than 100 property executives, legal advisors and investors, attended the event and it was organized to bring together the industrys top professionals, to debate on all aspects of the real estate investments and development and to address the challenges faced by the real estate industry. The debate was mainly about the investor confidence in the market and about their issues such as defaults, late payments, fraud and defaults (Bill, 2008, p2). Sunil Gomes of Guru Real Estate stated Credibility is king, if we lose that we have nothing. Projects must be completed and investors better protected. It was decided that the key factors for recovering will be boosting confidence within the market with the help of new investment strategies and opportunities for investors, greater transparency and brand credibility and trust. The issue of residential visa also came under discussion. (Galal, 2008, p71)
After the Dubai government announced that foreigners can own the property in 2002. All the banks and financial institutions started to offer mortgage loans on low interest rates. Among those were Amlak Finance and Tamweek PJSC, which were launched in 2003. They captured 65 of the local mortgage market by offering lower interest rates and attractive financial offers such as up to 95 financing. A lot of investors were attracted to the offers and these financial institutions became popular among customers. Mortgage could be arranged in less than 2 hours. When the financial crisis took over Dubai, it became difficult for the financial institutions to thrive because of delayed payments, defaults, frauds etc. The customers who availed the loans above their means were forced to put their property on resell to repay the loans. It created lack of trust, liquidity and confidence in lending loans. (Robert, 2008, p34)
Now, the lenders are taking drastic measures to save themselves from the current slowdown. About half of the banks of Dubai stopped lending and the others became very strict in giving loans by raising minimum requirements. There are no more attractive financing offers. The rates of the interest have been raised. The UAE EIBOR (Emirates Interbank Offering Rate) set its interest rate at 3 while the banks charges interest at 8.5 to 10.5 to earn profits. Arabian business.com stated, Credit guidelines have tightened significantly and we dont expect significant loosening during any point in 2009. The situation of lending institutions combined with fall in the price of residential properties has causedsevere turndown in Dubais real estate market. The UAE Central Banks imposed all banks to finance not more than 20 to one particular sector and the banks have to eventually stop financing for the moment. The mortgage market value at the close of 2008 was AED 16 billion which is 3 of UAE total GDP more than half of which was contributed by TAmweel and Amlak. The two financial institutions have stopped operating until the merger with Emirates Development Bank which isa Government Bank in Abu Dhabi. After the merger in the second quarter of 2009 the financial situation is expected to start getting better. After this merger, the money put into the economy is expected to bring down the interest rates and down payment requirements (Harry, 2009, p56).
The role of banking sector in the current financial crisis situation was also highlighted where the credit is available only to low risk customers. Banks are now stricter in lending credit, security requirements and have raised the minimum lending criteria. The panel agreed that the banking sector needs consistency in interest rates and approval ratings. The panel concluded the early signs of the recovery from financial crisis may be forecasted to appear at the close of 2009 or early 2010. The personnel of the major construction and investment companies operating in Dubai also have concerns regarding the changing situation of the real estate market of the city. Eng. Khalid Esbaitah, CEO and Managing Director of Al Mazaya Holding said, There are a number of factors that any developer considers when embarking on an investment in any region in the world, and perhaps the estimated revenues of particular investments is what drives investors to go forward with the investment or to draw back from it. However, market movement, plot prices, infrastructure and legislation frameworks are the main factors for the success or failure of an investment. He also said that it could be the perfect time to invest in Dubai real estate property as the prices are expected to go down to their lowest in the summer but in less remarkable manner than the last year and then the prices are going to stabilize as the real estate market in Dubai is able to recover from global financial crisis in a rapid way as compared to other markets. In conclusion, he said that Al Mazaya is conducting a number of studies of the market and preparing new investment strategies to make use of investment opportunities currently available in the property market and take advantage of prevailing economic situation. (Edmund, 2008, p1)
For many years, Dubai has been one of the worlds fastest growing economies with many investors begging the developers to accept their money for any of their projects, which have been approved to be started. But recently economic situation has compelled the development progress to be unexpectedly very slow. In November 2008, one of the major developers MiNC Property Enterprises has demanded up to 88 increase in capital investment to pay for the construction costs after the shortage of funds caused by withdrawing of project financing by two funding banks. MiNC Property Enterprises is a property developer, investment and advisory company with its offices in London and Dubai. MiNC invests on both its own account and on behalf of its clients. The CEO of the company sent a letter to its clients explaining the current financial situation of the company. The letter says that the land MiNC purchased from Nakheel for the construction was given to them after one and a half year which led to A significant negative impact on the project a doubling of construction-related professionals fees and a large increase in government imposed costs. In addition, The arrival of the global financial crisis has had a severe impact on the monies MiNC has available to build Prodigy 1. We are no longer able to subsidize construction of the project the project needs to be self-funded as originally intended.
MiNC faced two major issues. Firstly the regulations imposed by the Dubais government made its original investment plans no longer legal and secondly the withdrawal of financing of their project Prodigy Development in Dubais Jumeirah Village. We are in an extremely difficult situation, Simon Everest, Director of Operations at MiNC told AME Info.Banks have pulled all the finance, so we have the choice of either sitting, doing nothing and waiting it out, like some of our competitors are doing, or we need to find another solution. MiNC faced very difficult financial situation from these two issues so it called the investors to pay an additional price of Dhs 326,000 on units originally sold to them for Dhs 370,000, which is 88 of the original price. The company also requires the additional payment upfront and the remaining installments to be paid according to original terms. In return the company would pay 8 rental returns on increased purchased price in trying to alleviate buyer displeasure. The company soon observed that there is shortage of new buyers coming to the real estate market of Dubai and as a result it is not possible for them to sale the property at high prices. The company officials also disclosed that the decision was made in the current economic climate, which was outside of their control, and it showed fear that the project might be suspended if the proposed target was not achieved.
The investors responded to this situation has been negative, with many refusing the terms of additional investment as they felt greater insecurity. Subsequent to the investors response MNiC has reduced the premium requested to a maximum of 30 or Dhs 200000 (whichever is lower) as a number of investors who bought the property at pre-launch prices still consider the premium requested excessive. In order to safeguard investors interests and security, Dubais Real Estate Regulatory Authority (RERA) is currently reviewing 27 projects that it may cancel unless they prove that there is progress in construction and they have registered the land properly. According to officials, The Dubai land department and RERA have set up a committee that will decide on the cancellation of unviable projects. The committee will study and analyze non-feasible projects. In the way the investor have been reassured that despite the economy is affected by the devastating global recession, they are provided with the secured market.
The escrow account is created for the sale of off-property plans so the amount must be used for the construction of the property. As the real estate market is facing a lot of problems such as falling in prices and shortage of lending, RERA has frozen the escrow accounts of the developers unless they complete the technical report and requirements of the law proving that the payments are linked to the construction progress. The new guidelines by RERA restrict developers to conduct sales on any project unless they fully own the property with at least 20 percent finance secured for its construction. Developers can collect a maximum of 30 percent of the total price of the property purchased, the payments must be linked to the construction process, and they can collect the said percentage of the total price only after they have attained the standards set by RERA. (Edmund, 2008, p1)
In February 2009, RERA introduced an online monitoring report, by which the property buyers can discover whether the construction of their homes are cancelled, delayed or is on schedule. This report will be updated on a monthly basis in order to protect investors concerned about the housing market downturn. The Independent Progress Monitoring Report (IPMR) is a scheme by which government engineers tour residential construction sites to check that progress is being made and asses the stage that work has reached. An online report will be published every month with the details of what has been completed and what has to be done. The online report will also comprise of photographs of the latest developments in the projects, approval from a number of the developers at RERA, name of the bank involved and a summary of the total growth-taking place at the site. The CEO of RERA mentioned that it will keep track of bit by bit progress of every project in Dubai. Monthly report will be generated of each property as trust and transparency of Real Estate Dubai cannot be compromised. Currently RERA is considering to cancel 27 projects as it has the right to cancel the projects which the developers do not start or do not have intention to begin. Besides, RERA is also ensuring that they must approve all amended payment schedules. Real estate property prices are plummeted to 40 in the first three months of this year. A collapse in the property prices has already led to project cancellations. In February 2009, the number of developers has come down to 427 from about 875 developers. The global financial crisis may have slowed the construction progress in Dubai but the demand for residential real estate is continuously increasing as if the crisis has not affected Dubai at all. The demand for residential properties has been observed to be rising continuously which is likely to be higher than supply. According to Mr. Mohamed Alabbar, Chairman of Emaar Properties, the demand of real estate units are expected to outweigh the supply during 2009 (Peter, 2008, p76).
The rise in demand of the residential property in Dubai is also due to the issuance of residency visas to the expatriates who purchased the property. Earlier the major developers like Emaar Properties and Nakheel Properties sponsored the owners for the three years renewable residence visas, which attracted foreign investments in the region, but they stopped the facility to the buyers according to the new law. Recently the government is considering issuing freehold property visas to the property owners. According to experts opinion, it is a wise step to help build buyers confidence and attract foreign investments as the developers are facing the problem of shortage of funds. There are various residential projects under construction in Dubai. The houses and villas in Dubai residential real estate never lose their demand and attract both investors and single buyers. Buyers can always take advantage of their investment, they can choose to actually live in there, sell the property, rent it out to earn through rentals (Bill, 2008, p2)
Rental property in Dubai is the highest in demand as more and more foreigners are coming each month seeking accommodation. The demand for rental property is so rising extremely that it has outbalanced the supply and it has became harder to find a place to accommodate. The supply is short because of the reason that the development progress is much slower than expected and the potential investors are reluctant to purchase the properties to rent out because they fear that their investment might not bring the desired returns in the current financial crisis. The development process has gone way behind the schedule due to the imbalance in demand and supply. Buyers of the villa project in Jumeirah islands are irritated by the delay in the construction of their houses as they are given the delivery date, which is about six months late than the planned date. Because the buyers have to wait for the new projects to be completed and the population in Dubai is rapidly increasing, the pressure is exerted on the existing stock of the houses and apartments and the rentals are increasing day by day. Under the current circumstances, the rentals are continually rising and it is getting harder for residents to afford a desirable accommodation (Bill, 2008, p2).
The effects of global financial crisis upon the real estate sector of Dubai have been widely observed and experts commonly believe that after the crisis, the city has become a riskiest place because the investment made in the real estate sector of Dubai cannot be expected to bring profitable results in coming days. Due to this uncertainly, Dubai earlier the paradise for the investors is not facing disappointment from the side of the investors because many of the residential projects are feared to be failed due to lack of interest of buyers. When the market conditions were suitable in Dubai, the people widely welcome the decision of the government to allow property right to the non-Arabs and many of the investors immediately booked many of the residential apartments. However, now the people are not interested in investing their money in the real estate sector because they are not expecting high return rate for their investment. Instead they are afraid about facing massive loss on their investments. The uncertainty within the real estate sector of Dubai also compel some of the property experts to compliment the market with the comments of most unsafe and risky market within the real estate sector and some of the experts also believe that after the war time, this is for the first time that the Dubai real estate market has faced such drastic conditions (Alex, 2009, p1).
The kind of growth that Dubai has seen over the past years requires a massive and constant inflow of experts to buy and rent properties. Following the global economic meltdown it is with no doubts that immigrations to Dubai have reduced. The recession has left so many in the city unemployed therefore with no capacity to buy or rent a house. People came from all corners of the world to come and work in what was a robust and growing market. When the market for real estates dried up, most of these people had no business being in Dubai because they had come here to work, get money and go home (Property Digest, 2009). So these people had to move out to make a living elsewhere. This emigration has continuously worsened the real estate condition as more and more occupants continue leaving the country.
Dubai real estate is hitched upon two critical variables i.e. immigrants (expert workers from other industrialized countries) and cheap foreign labor from developing countries. As an exciting market for real estates and construction, the city attracted experts and investors from all over the world. Dubais population which is made up of 70 of people with Asian origin and 10 Bangladeshi means that its economy really depends on the activities (Globizon, 2009). Most of these foreigners are businessmen and they are only in Dubai because they are doing business. The failure of Dubai to provide them with suitable conditions no longer gives them reasons to continue being there. Most of them have been leaving to other regions of the world. The real estate market and construction in Dubai contributes almost 25 of its economy. Such high dependency on such volatile projects is very risky for any economy. Real estates are very volatile and they are so much affected by what happens in the international community. An economy that might over-rely on such a risky project can suffer a major pain in times of recession. Thats the case with Dubai (Globizon, 2009).
It is reported in many of the major news portals that the cancellation of the construction of many of the residential as well as commercial projects in Dubai has drawn destructive impacts upon the city because the cancellation of these projects is big loss of many of the investors and business people. Even after some months of the crisis, the city is still struggling with its aftermaths and the residents of the city that mostly consist of foreign people are very much worried about the future of the property prices in the coming days. Some of the people face loss as they have made their investment some time before the crisis when the property prices were very high in the city. These investors were expecting high return on their investment because the real market was flourishing with high pace however, despite getting profit these investors face major losses in term of decline in the prices of the property. Now most of these people are waiting for the settle of the market situation and the investors are mostly holding their invested property to wait for the good time.
2.5 Summary
The chapter provides detailed review of the related existing literature and it is found that the global financial crisis affected the real estate sectors all over the world. The real estate sector is closely connected and dependent upon different financial instruments and as a result of the destabilization of the financial markets, the real estate sectors are getting less investment and financial resources due to which the prices of the properly are falling in most of the parts of the world. At the same time, the demand for the property is also decreasing because the people are now less willing to invest their money in the real estate sector. The recession of many of the real estate markets cause the lost of millions of dollar to the investors and construction companies and the work of the construction of more projects is also affected. It is found that after the global financial crisis, the construction work of many of the giant building projects has been stopped by the construction companies due to the shortage of finance and reduction in the number of the potential buyers of these projects. Many construction companies have also reduce the number of the workers and their working hours because they have now less work to do. As a result of this, the rate of unemployment is also increased and many people related with the construction of the buildings have lost their jobs.
It is also revealed from the above discussion that the Dubai real estate sector also witnessed the intense effects of the global crisis. The city use to welcome great number of foreigners and foreign investments that was considerably cut down because of the global crisis. There are many giant building projects under construction in the city but the unavailability of the financial resources and lack of the interest of the buyers has compelled the constructors to stop their work. There are many residential projects that were built in the city with the expectation to attract high number of buyers but these projects are now expected to fail mainly due to unwillingness of the buyers because the people do not have the opportunity to buy these residential units after taking the loans from the banks.
The banks are also operating in the uncertain conditions due to which they are not open towards providing loans. The entire situation is great point of worry for the investors and other businessmen because Dubai is the economic gateway for the Middle East and the people want to see it flourishing again. There are certain measures taken by the government to cover the damages of the crisis from the real estate sector and it is expected that the city will soon recovers from the aftermaths of the global financial crisis that draw destructive impacts upon the real estate sector of Dubai.
The recession of the real estate sector has also badly affected the overall image of the city at international level because the investors from all over the world earlier willing to invest in the city are changing their plans quickly and most of these investors are looking towards different other investment destinations that are less affected by the financial crisis. This trend has further declined the rate of the investment in the city and the chances of stability of the market are very little at present. But there are contrary views of the experts regarding the chances of improvement in the situation. There is a growing body of thought that believe that Dubai will soon recover from the shocks of this economic collapse and very soon the real estate sector will regain its position.
These hopes are built on the fact that the city possesses such an important place not only for the UAE itself but also for many of the developed nations that efforts will be done to stabilize the situation at soonest possible time. There are offices of many strong multinational companies that will not like to see the city remain in falling position and thus, these investors, companies and their countries will also help Dubai to attain its position. It is hopeful that the investors from different countries of the world will soon restart the investment in different sectors of UAE economy due to which the major city of the country will also be able to get its position back. This improvement is expected to bring great level of change in the demand of the property prices also and the optimist group of thought believes that the real estate market of Dubai will get back its previous position very soon.
Other related research work related to this study
Premium Real Estate in Kenya- a research done to establishing whether there was need for establishing property indices in the year 2009.
Polish commercial property- a research conducted to establish the position of the real estate and comparing it with the results of 2009.
Global Rental Market decline- a research done in Middle East and South America on the response of real estates to global recession of 2009.
Indian real estate- the report focus on the Asia-Pacific real estate investment and development trend.
3. Research Design
3.1. Introduction
The chapter explicitly explains the research method employed to attain the objectives of the research study. The chapter describes the research questions to explain the focus of the research study. Furthermore, the research type, method and outcome are also explains to give an idea about the research study.
3.2. Research Questions
The main focus of the dissertation is to examine the role of global crisis in the real estate market crisis. Thus the main research questions are as follow
What is the role of global crisis in the real estate marker recession all over the world
How different residential areas of the city received the impacts of the crisis
Were the same effects encountered in other countries
What other factors that led to the real estate crisis
What are the effects of global crisis to the real estate sector
3.3. Research Type
Before deciding the methodology of a study, it is very important to clarify that what is the purpose for which the study is being conducted. There are four purposes that a research study may intents to meet including exploratory, descriptive, analytical and predictive (Aaker and Days, 1990). It is important to have an understanding of these types to decide which of the purpose best represents this research study.
The Exploratory research is one of the important methods of conducting the research study that always get considerable attention of the social scientists. The exploratory type of research is a significant research type that stands for the investigator just to look around regarding the needed phenomenon, for developing suggestive ideas. This research type is beneficial for conducting wide range of research study and it assists in solving uncommon problems or when the available information is not much reliable and absolute. This technique is most suitable for conducting interviews (Aaker and Days, 1990). Thus it was not employed in this research. If we analyze the current research study in the light of the exploratory research then it is found that our research is also exploratory in nature as it will explore various issues that are not unfolded yet in the previous researches. As identified in the literature review, there are some unexploited sections in this sector that can be researched on. It is found that there is no research work done for comparing the responses of the real estate markets of different countries towards the global financial crisis and this issue will be explored in this research study.
The second type of research is the Descriptive Research that is also frequently employed by the social scientists for conducting research studies on variety of topics. The purpose of this type of research is to provide a description of different phenomenon related to different individuals, events and situations. The main objective is to build up empirical generalizations. It is commonly used for searching secondary data for the solution of different problem statements. Thus it can be noticed here that this sort of research and there is involvement of data and literature in conducting this type of research study. While looking at the research study, it is realized that the current study is not entirely descriptive in nature as it is mostly aimed at examining, analyzing and exploring the issues rather just describing them.
The third type of research is the Explanatory Research that possesses great importance in the context of the social scientific researchers because the main purpose of the explanatory researches is to build up precise theory that is utilized to describe the empirical generalizations. Mostly this type of research is based on the empirical studies and tested hypotheses that are formulated by the researchers in order to find out the solution to their problem statement. This type of study is effective to focus cause and affect relationship. It is also known as analytical research and the researcher generally goes for the description of the characteristic and the analysis and explanation of the entire situation to find out the reasons behind the happening of any incident. This type of research strives to understand and explain the phenomena through the discovery and measurement of the casual relationship between different factors. It is clear that our research study is also an explanatory research as it is aimed at explaining different issues and topics in details in order to conduct the analysis and examination of the situation. This research study can also be regarded as an explanatory research as it strives to present the analysis of the issue in detailed manner.
The fourth type of research is the predictive research in which the social scientists generally go further for making certain statements and comments by forecasting the likelihood of a similar situation occurring elsewhere. In this type of research, the social scientist mostly give the answers of the questions like how why and where and these questions are related with the future of the subject matter of the research and the research will provide the possibilities in the light of the findings that what will happen in case of any occurrence in future. In the light of the above explanation and description of the research purposes it is found that this research study is meant to be a combination of explanatory and exploratory research because it will strive to explore the issues related with the topic with the help of the existing research works as well as presents the comparative analysis to further analyze and explain the subject matter.
3.4. Research Method
After clarifying the purpose of the research it is important to decide that which process or the method that can best help in attaining this purpose of the research study. There are different qualitative and quantitative research methods that can be used to meet the objectives of a research study. It is found that the main objectives of this research study could be met best with the help of a qualitative research approach. Qualitative research is a field of inquiry that crosscuts disciplines and subject matters (Becker and Howard, 1996). The qualitative researchers are most of the times aimed at having deep understanding of different issues, human behaviors and the reasons and factors governing the human behaviors. In other words the qualitative research strived to find the answers of why and how rather than just where when and what. The qualitative research is also meant to be explanatory most of the time rather than just conclusive (Denzin and Lincoln, 2000). While conducting a qualitative research it is common to use different theories, models and hypothesis. Qualitative research is also regarded by the experts as an instrument that can be used for the development of in depth understanding of any phenomenon that can become the base for the quantitative research later on. (Denzin and Lincoln, 2000)
The significance of the qualitative research methodology justifies its selection for conducting the research studies and in the best step it is required to decide that which one of the qualitative research methods will be suitable for the study. As identified by Berg (1989), there are many ways of conducting a qualitative research including case study, literature review, natural experiment, participant observation, interviews based, and secondary analysis of data or combination of these. The researcher can selected from these methods according to the suitability with the research objectives. There are two qualitative research method selected for conducting this study. These methods include secondary analysis of data and the case study.
Secondary analysis of data is commonly employed for conducting different researches for many years and different social scientist have agreed upon the importance and significance of this research method. John Heaton (2000) threw the light over the significance of the secondary analysis of data and explains that the secondary analysis of data is a significant research method that is used for the description of various analytical practices using the pre existing data. This could be done either for the investigation of the new research question or for the re examination of any of the primary study for the purpose of collaboration.
The second method chosen for conducting the research is Case Study. It was decided to conduct a case study because case study is a significant tool that helps in gaining understanding of a complex issue or object. This method is commonly used by the social scientist for many years to analyze contemporary real-life situations. Yin (1984) explains that case study is an empirical study that aims at investigating any contemporary phenomenon in its real life style context. Yin (1994) describes that a case study can be Single or Multiple. For undertaken this dissertation Single Case Study was chosen because the study is aimed at analyzing the responses of the real estate markets of the residential real estate market of Dubai only. The case study is presented with the help of mixed methodology and both the qualitative and quantitative methods of research are used to develop the case study of Dubai real estate market. For getting the qualitative information elating the issue, secondary analysis of data is conducted of the available literature about the topic. Moreover a statistical survey is also conducted among 200 participants 200 is not a very big number and also its not very small, thus this number can ideally represent a population in any survey. The quantitative data could also be gathered for drawing the study results. In this way the study is conducted through literature review that is a qualitative method and statistical survey that is a quantitative method of research.
3.5. Research Outcome
The outcome of the study is also an important issue to decide while designing the research methodology. Shaughnessy et al (2006) explains that there could be three types of possible outcomes of a research study including Applied, basic or pure and action. When any of the research study is conducted with the intention of bringing out the solution of any of the specific problem then the results or outcome of the research is expected to be applicable because the outcome will be in form of some suggestions or decisions that can be used for resolving the issue (Shaughnessy et al, 2006). In the basic or fundamental research, the study strives to improve the understanding about any general issues while the emphasis of the research does not remain on the immediate applications of the study on any facet of the issue. The third type of outcome of the study is action in which action is the outcome of the research as well as the part of the research. In this the social scientists attempts to interfere in the environment where the problem exists and work out to bring changes in the situation. This research study is supposed to bring out basic or fundamental outcome because it will help in getting deep insight over the discussed issue and its different aspects.
3.6. Sources of Data Collection
The research employs different secondary sources for conducting the secondary analysis of data and in this regard different journals, research reports, magazines, books, electronic journals and web portals are accessed and information is gathered from these sources to conduct the analysis of the available secondary data. Stake (1995) and Yin (1994) identified that for a case study data could be collected from any of these six sources Documents, Archival records, Interviews, Direct observation, Participant-observation and Physical artifacts. For these case studies the data and information would be collected from documents and archival records. Moreover, the dissertation also employs primary sources of data collected for the study.
There are two research methods selected to conduct the study including the secondary analysis of data and statistical survey. Both of these methods are widely recognized as significant methods of conducting research studies. The social scientists use to conduct the studies on wide range of topics by employing secondary analysis of data as the research method because this method has proved its significance as one of the most useful qualitative research method. Thats why it has been employed in conducting different researches for many years and different social scientist have agreed upon the importance and significance of this research method. This method is found relevant with the research study because the review of the researches focused on the Dubai real estate market allows the analysis and examination of the sector by going through the historical perspective of the sectors performance. Miles and Huberman (1994) explain that the secondary analysis of data basically helps to reanalyze the data that is already compiled by other researchers and organizations to meet the requirements of their own study or data base. Hence, in the light of the significance of secondary analysis of data as a qualitative research method, it is selected as the research methodology for the paper.
Along with secondary analysis of data, a statistical survey was also conducted using a questionnaire among 200 respondents. A 100 of whom were real estate agents and the other 100 were residents of Dubai picked at random, their diverse opinions were necessary for this survey. The statistical survey appeared to be the most appropriate and suitable research method for the study and the social scientists has also confirmed the importance and significance of this research method for conducting quantitative research studies. Tanur (1982) explains that a statistical survey is an efficient way of collecting information from a large number of respondents, the gathered information can be used to study attitudes, concepts, values, beliefs, and behaviors. Massey, OConnor and Krotki (1997) explained that a survey is effective and efficient method of collecting data from large number of respondents that allows the data collection from very large samples. Surveys are also considered as flexible research methods because they are standardized and easy to administer. Abramson and Abramson (1999) clarified that the statistical survey possesses some advantages as well as disadvantages that can be experienced by the social scientist while conducting the research studies using the statistical survey as the research method. According to the researchers, the statistical surveys are very efficient method of research that allows the researcher to collect information from a large number of respondents because the study over a very large sample is possible with the help of the statistical surveys.
The information gathered from large sample can easily be used for the determination of validity, reliability, and statistical significance with the help of the statistical techniques that are commonly used for the calculation of the survey results. The surveys are considered significant because of being standardized and there are usually free from certain errors and easy to administer at different levels. In the same way there is less time and money required to conduct the survey because the survey sampling prior to the survey allows to specifically contacting the people whom opinions are required and in this way the money of contacting and accessing many people is saved. Moreover the specific questions related with the topic and objective of the research allow gathering the information in less time as focused questions and their answers are asked, recorded, codified, and analyzed by the researchers with the help of the statistical surveys.
3.7. Selection of Respondents and Questionnaire for the survey
Statistical population is the group of respondent that is used to draw inferences about the entire population during a survey. Survey sampling is one of the most important issues and step that the social scientists have to conduct very carefully and systematically because the selection of the survey sample is considered very critical to the validity of the information that represents the populations that are being studied. The sampling of the survey determines the focus of the study on the particular level and group of people and should also assure that there is no biasness in the selection of the respondents. Ornstein (1988) explains that there are two main techniques for the selection of survey sample these include the non-probability sampling approach and the probability sampling approach. The non-probability sampling approach is also called the convenience sampling approach as it included the respondents in the survey on the basis of their willingness and availability regardless of their group affiliations. This method is very convenient for the researchers as they can go for gathering the information from anyone whom they can access but at the same time the level of the validity is also very low in this type of sampling because it does not assures the representation of different groups and level of people.
The another approach for the survey sampling is the probability sampling approach that assures that each of the elements associated with the research will get equal representation in the survey and responses will be collected from the people that specifically belong to the group under study. It is regarded as a true representation of the population however the researchers often face problems due to unwillingness, non-availability and inaccessibility of some of the respondents. According to this sampling approach, the researcher can either simple random sampling or stratified random sampling. This approach is selected for the study and after dividing the city in to different zones, the participants are selected for the study.
A list of real estate agencies was drawn from the Yellow Pages of Dubai and then from all the major areas of the city, one real estate agency was selected. The agencies were contacted though the phone number available at the directory. The owners of the agencies were requested to take part in the research work and appointment was taken from them for the interviews on telephones. Some of the questionnaires were got filled face to face, whereas most of the respondents were sent the questionnaires via email and their responses were also collected through electronic mail. The residents were selected randomly, however, they were selected on the same patterns and from each area, one resident was selected and requested to take part in the research work. The participants for this study were selected from those willing to participate in the study, based on the inclusion criterion that was established. Also, prior to administering the questionnaires, participants were requested to formally express their consent to participate by filling and signing the informed consent form. Subject confidentiality was ensure by coding each participant form with a corresponding number, so that only the research team will have access to the information of the research subjects. Also the privacy of all confidential business information that the researcher might receive trough the course of this study will be ensured.
The questionnaire for the survey is constructed by using the Likert scale that is a bipolar scaling method used to measure either positive or negative response to a statement (Likert, R, p55, 1932). It is a common system that is used is the surveys. By following the Likert Scale the respondents are asked to indicate their degree of agreement with the statement or any kind of subjective or objective evaluation of the statement. Traditionally a five-point scale is used under this methodology. For this study also the five point scale system is used and the respondents were asked to express their opinions about the given statement by picking the answer from the given 5 options Strongly disagree, Disagree, neither agree nor disagree, Agree and strongly agree.
Before the final distribution of the questionnaire a small pilot study was carried out in Dubai where 30 copies of the questionnaire were distributed randomly and responses were collected and analyzed from the answers. The aim of the pilot study was to make sure that the questionnaire is understood clearly by the intended participants. This was achieved by analyzing the responses of the sample respondents group, then the difficult, irrelevant and ambiguous questions were either scrapped out or review. The questionnaire was then supplied to the marketing managers of the selected firms. The overall response of the companies representatives towards the survey questionnaire was encouraging. As the questionnaire consists of close ended questions and the respondents were not asked to write too much regarding their experiences and opinions so they found it convenient and fill the questionnaire in short time period.
Grooves (1989) explain that there could be different methods of collecting the information from the survey sample. These methods of conducting surveys include mail, electronic email, face to face, telephonic interviews, online surveys and personal in home surveys. The researcher can choose from these methods according to the sample and requirement of the research objective. Each of these methods causes different cost and time to the researcher and every method possesses different level of significance and response rate. For example sending the questionnaire via mail is low cost method but requires more time, on the other hand accessing the respondents face to face takes more cost of transportation and human resource but it takes less time to collect the response and the rate of returns is also higher in this method. The online survey are very low costing methods but for this it is necessary that all the respondents included in the survey must have access to the internet. Thus for this statistical survey the face-to-face administration method is chosen.
When the researchers administer the statistical surveys then they are called researcher administered survey (Grooves, 1989). This statistical survey is also administered by the researcher after hiring 3 research assistants that administered the survey face to face. This method is chosen to collect the responses from the survey participants because the residents were randomly selected at different spots that were easily accessible and would not interfere with the privacy of the respondents, areas targeted included shopping malls and different parks in the city. These people were approached and their responses were collected at the spot rather taking their email addresses and contacting them later. This is more time saving method of data collected thats why the data was collected through face to face interaction with the residents of the city. the real estate agents were also asked face to face to fill the questionnaire because different real estate agencies located at different areas of Dubai were visited and the questionnaire were also got filled by the responsible people present here to save time.
Along with the selection of the method of data collection, there was an important issue to resolve that how the response rate of the survey could be increased. Ornstein (1998) revealed that the social scientists can also use several techniques and methods in order to increase the response rate of their survey questionnaires. For example they should try to keep the questionnaire short so that the respondents can be assure of spending less time in giving the answers. The long questionnaires often stop the respondents from giving answers as they have to allow more time for them. Thus, keeping in view this technique in mind, the questionnaire of the research was kept shorter so that the respondents can find it easy to fill the questionnaires in less time.
Some other techniques of increasing the response rate of survey have been utilized for this survey for example the respondents were notified prior to the face to face meeting about the research objective and details so that they can be mentally prepare to answer the question and feel easy and less time consuming to fill the questionnaires. The respondents were also convinced that the research study is aimed at bringing improvement in the situation where these professionals are working so of they will positively contribute to the study and will make it successful and reliable then they will also be among the beneficiaries of the research. Moreover the respondents were also assured about the confidentiality of the information they provided in the survey questionnaire and the details of the respondents is not mentioned in the research reports as per the agreement of anatomy. In this way attempts were made to increase the response rate of the survey questionnaires.
The results of the study are then collated, compared, and analyzed. As both the secondary and primary sources are utilized for the research, the information and data gathered from these sources is presented separately at first and then it is analyzed and interpret together so that the findings of the primary research could be supported by the secondary information. These data will be presented through various visual presentations such as tables, graphs and charts for easy reference. This will make comparisons and analyses easier and will make plainer the relationships between the variables and factors that shall have been identified by this study. The relationships between variables shall be highlighted. The result of the methods employed will be presented in an easy to understand manner, and in tables or matrices where possible. Such an analysis will help highlight the relationships between the variables identified in the study. Through this set of guidelines, they will be able to make the transition and implementation as smooth as possible and they will be able to avoid the pitfalls in conducting such an endeavor. In order to calculate the survey results the similar responses for the statements are counted and then interpretations are drawn on the basis of the responses gathered for each statement.
The following questioner was used in conducting of statistical survey among 100 real estate agents and 100 residents of Dubai city. The questioner was in the custody of selected research assistants who supplied them to the target population randomly. The research assistants helped the respondents in filling of the questioner.
Questionnaire
This questionnaire contains 15 open ended questions. Please answer the questions as best as you can. All information filled in this questionnaire will be treated confidentially.
Section I
Name ..
Area of Residence
Company Name
Designation ..
Email address
Nationality .
Section II
The global financial crisis affected the real estate sector up to a greater extent.
Strongly Agree
Agree
Not Agree neither Disagree
Disagree
Strongly Disagree
The response of Dubai real estate market towards the global crisis was very immediate and strong
Strongly Agree
Agree
Not Agree neither Disagree
Disagree
Strongly Disagree
The negative impacts of global crisis upon the Dubai real estate market were expected.
Strongly Agree
Agree
Not Agree neither Disagree
Disagree
Strongly Disagree
The global financial crisis has drawn intense and long term impacts upon the growth and development of the Dubai real estate industry.
Strongly Agree
Agree
Not Agree neither Disagree
Disagree
Strongly Disagree
The residential sector is more affected from the global crisis as compared to any other sector of the real estate market of Dubai.
Strongly Agree
Agree
Not Agree neither Disagree
Disagree
Strongly Disagree
The initial response of buyers and investors was very disappointing in term of new contracts and deals
Strongly Agree
Agree
Not Agree neither Disagree
Disagree
Strongly Disagree
Dubai real estate was affected by the global financial crisis greater than any other state of UAE.
Strongly Agree
Agree
Not Agree neither Disagree
Disagree
Strongly Disagree
Dubai real estate market is now recovering from the shocks of financial crisis slowly
Strongly Agree
Agree
Not Agree neither Disagree
Disagree
Strongly Disagree
The recession causes the fall of property prices in all the areas of Dubai equally
Strongly Agree
Agree
Not Agree neither Disagree
Disagree
Strongly Disagree
The luxurious residential areas of the city were more affected from the crisis as compared with the other areas
Strongly Agree
Agree
Not Agree neither Disagree
Disagree
Strongly Disagree
The number of buyers in the Dubai residential property market fall massively ever after the fall of property prices after the crisis
Strongly Agree
Agree
Not Agree neither Disagree
Disagree
Strongly Disagree
The government failed to gain the confidence of investors upon the market conditions
Strongly Agree
Agree
Not Agree neither Disagree
Disagree
Strongly Disagree
Dubai will soon recover from the aftermaths of global financial crisis
Strongly Agree
Agree
Not Agree neither Disagree
Disagree
Strongly Disagree
The failure of government policies and strategies is an important reason behind the recession of Dubai real estate market
Strongly Agree
Agree
Not Agree neither Disagree
Disagree
Strongly Disagree
The government can still control the situation through effective planning
Strongly Agree
Agree
Not Agree neither Disagree
Disagree
Strongly Disagree
Thank you very much for your time
3.8. Summary
The data collected from the questionnaire was valid as it provides the required analytical data that will further be used in analysis to establish the extent of the problem in question. This chapter explains the methodology of the research in details manner. It explains each aspects of the research design including the type of the research, the purpose of the research, and the type of the outcome that the study intents to bring out and the methodology that is believed to assist in achieving all the described aims and objectives of the research study.
4. Findings of Research
4.1. Introduction
The chapter presents the findings of the research study attained through different secondary as well as primary resources. As mentioned above, the data and information for the study is collected through secondary analysis of data and statistical survey, the following part of the dissertation presents the key findings of both of these methods to provide an overview of the main findings of the study.
4.2 Duration of the Research and data analysis
A time period of three months was decided to be picked for the primary and secondary data collection. Also a plan on the time duration necessary to complete data analysis and completion of the thesis was estimated to be six months.
4.3. Key Findings of Secondary Research
The research study presents the review of the exiting literature and there are certain issues related with the topic of the dissertation that become clear as a result of the review of the related literature. The secondary analysis of data allows having an understanding of the background of the problem and the importance of the issue. It is found from the secondary analysis of data that the global financial crisis in 2007 badly affected all the sectors of the global economy and the real estate industry also faced serous aftermaths of the crisis because the real estate sector is closely connected with the financial instruments. Dubai real estate market is also badly affected from the crisis and as a result of non availability of the financial resources, many of the giant construction projects were closed in the city. Many other projects that were already completed are failing because the customer didnt respond favorably towards these projects and the real estate agents witnessed massive reduction in the number of the buyers. The investors are also now less interested to bring their money in the real estate due to which the overall growth and development of the real estate sector of the city is badly affected due to the crisis.
The secondary analysis of data threw light over the reasons due to which there was rise in the demand for the property prices in the city and it is mentioned in the review of the literature section that Dubai was tuning out to a global city because it possess a multicultural highly diverse population that seek different business and employment opportunities here. The policies of the government were very supporting to attract the foreign investors here. The rise in new projects and business activities also call for more labor and the labor class mostly belonging to some under developed countries gets attractive employment opportunities here. As a result, the people of different class some to find residence here so that they can take the benefits of growing economy of the city. The arrival of the people in abundance from different countries of the world contributes towards the demand in the property and this demand ultimately led to the rise in the prices of the property. The city witnesses high pace of property price rise in different areas however, the active role of the foreign investors also became a reason for the economic collapse of the city in 2008. When the global financial crisis approached the world economy, the Dubai real estate market became one of the major victims of this crisis because of the closure of many business projects and returns of many investors to their homelands.
It is also found from the secondary research that the metropolitan city of UAE witnessed the exile of many people soon after the global crisis when they become unable to pay the bank loans due to unemployment. Many of the residential mega projects were failed and rolled back and many that were recently completed faced massive decline in the prices. Thus, it is found from the secondary analysis of data that the buying within the residential real estate sector is badly affected from the global financial crisis that in turn led to the failure of many projects, cut down in the number and working hours of the employees of many construction companies, job loss of many real estate agents and labor associated with the construction work. All these effects were led by the factors including the unavailability of finance to buy residence, lack of interest of foreign investors, reduction in the population of the city and non lenient policies of the banks to provide credits to the investors and home buyers.
4.4. Key Findings of Primary Research
The primary research was conducted for the study in form of statistical survey conducted among 200 participants. Out of these 100 were the real estate agents and 100 were the residents of Dubai randomly selected from different areas of the city. A total of 169 filled questionnaires were received after the duration for data collection expired. Some of them were not completely filled by the respondents and finally 150 questionnaires were included to make the results of the survey. There were several techniques also being employed to keep the response rate at high level. The results calculation brings the following results.
There were two sections made in the survey questionnaire. The first section asked the respondents about their personal and professional detailed. The answers of this section are not included in the dissertation as they were deemed unnecessary in this specific study. There were total of 15 statements in the second section of the questionnaire and the respondents were asked to express their level of agreement with the given statements. The responses of the survey participants collected through the second part of the questionnaire are as follow. The first statement asks the respondents if they agree that the global financial crisis affected the real estate sector up to a greater extent.
The outcomes of the survey are as tabulated in the table below.
Question numberAnswers from the Respondents Strongly AgreeAgreed Not Agree neither DisagreeDisagreedStrongly disagreedQ.1Estate Sector was hit by Global Crisis01231250Q.2Response of Dubai Real estate Market to the crisis was immediate 111211071Q.3Was Global Crisis upon the Dubai real estate market expected872313189Q.4Global Financial Crisis brought long term impacts upon the development real estate industry901510139Q.5Residential Sector was more hit by Global Crisis than other sectors of the real estate market 1576242521Q.6Response of Buyers and Investors was very disappointing in term of new contracts and deals8933221411Q.7Dubai real estate was affected by the Global Financial Crisis greater than any other state of UAE102341125Q.8Dubai real estate market is now recovering from the shocks of financial crisis.5444111813Q.9recession causes the fall of property prices in all the areas of Dubai2226334321Q.10Residential areas of the City were more affected from the Crisis as compared with the other areas434392130Q.11Number of Buyers in the Dubai residential property market fell massively after the crisis56
32
10
32
12
Q.12Government failed to gain the Confidence of Investors upon the Market Conditions34
22
114319
Q.13Dubai will soon recover from the aftermaths of Global Financial Crisis34
21
13
43
37
Q.14The failure of the Government Policies and strategies is the reason behind the recession in Dubai real estate Market43
32
62121
Q.15Government can still Control the Situation Through Effective Planning43
45
5
3211
Table Showing the Outcome Characteristics of The Survey
4.5 Summary
The chapter presented the discription of the key findings of the primary and secondary research study. The above discription allow having quick look at the findings of the study that will be used in the later parts to conduct the analysis of the findings and to discuss the main issue of the dissertation.
5. Analysis and Discussion
5.1. Introduction
The key findings of the primary and secondary research study being described in the last part of the dissertation are analyzed in this chapter in order to give meanings to the facts and figured derived from the study. The chapter presents the detailed analysis of the research findings in order to find out the answers of the decided research questions upon which the entire research study is based on. The analysis and discussion of the main issue allow having enough understanding of the topic to test the research hypothesis and thus, the chapter also presents the hypothesis testing to affirm the logical outcome of the study.
5.2. Analysis of Research Findings
This analysis does not include central tendencies characteristics of the data collected from the survey. The analysis was deemed not necessary as the fields that were included in the survey are independent and are not interdependent. However, an extensive analysis of the data collected and analyzed will be discussed here under. The dissertation employs both the secondary and primary resources to collect information and data for the study. The secondary data is collected from different print and electronic resources whereas the primary data has been collected through a survey conducted among 100 real estates agents and 100 residents in Dubai. The secondary analysis of data allows having complete understanding of the current position of the real estate market of Dubai. Furthermore, it also provides an overview to the development and growth of the market and highlighted the factors behind the rising demand of property in the major city of UAE.
The analysis of the literature related with the situation of the real estate market all over the world informs that the financial crunch is responsible for the rise in the rate of unemployment especially in the real estate sector all over the world. Many of the developing countries were witnessing the trend of rapid pace of development in their real estate sector due to the fast growth of their economies like China and Dubai.
The real estate markets of these countries were flourishing before the crisis because people from different parts of the world were willing to set up their businesses and residence in these countries. Keeping in view the trend of fast growth of this sector, there were many people that were attracted towards the real estate sector and in these countries the number of employees engaged by the real estate sector was also increasing. There was continuous opening of new real estate agencies in these countries because there was great scope for this business. At the same time, the number of the employees attached with the real estate sector was also rapidly increasing because the heavy flow of the work in this sector was demanding more human resource for the management of the matters related with these sectors.
This situation was very much hopeful for the people because the real estate sector requires specialized people that have knowledge of the contracts, agreements and fare decisions etc. This knowledge is easy to get and any person willing to enter the real estate business can enter without getting any special technical education from anywhere. This was a positive sign for many less educated people that they have opportunity for business in front of them where they can earn without having technical knowhow. They only need some knowledge and even that is easy to acquire. This factors work efficiently along with the growing demand for the property in many of the developing countries and people at large started adapting the profession of the real estate expert or real estate agent. These people were able to get some work because there was great room for people in the sector before the crisis. However, when the crisis hit the real estate market, the work flow was immediately inversed. The real estate sector shows the signs of downfall and naturally there was no need of many workers to manage the work of the sector. Now the people attached with the real estate business face lots of problems because their employment came to an end. This situation affected the overall employment situation of the world and it is found that as a result of the unemployment of the real estate sector, the overall unemployment in many of the countries is also increased.
The secondary research further reveals that Dubai being the IT hub and main economic center of the UAE region is great point of attraction for the foreign investors and businessmen. The companies from all over the world remain interested in doing business in UAE and there are offices of many multinational companies operating in the city. As a result, the number of foreigners is also very high in Dubai and their need of accommodation remains very high. The open trade policy of the government further invites the businesspersons and companies from all over the world to enter Dubai and get involve in business activities. All these strategies bring lot of business volume to the city and the presence of the foreign investors and businessmen as well as labor also went on increasing. The situation ultimately raised the demand for the property in the city because lot of people coming from different parts of the world to the city need place to set up their businesses and livelihood. The residential sector of Dubai real estate market also started flourishing due to high demand of residential property in the city and gradually the prices went on such a high level that they become inaccessible for many for the people coming to the city. Experts also refer the rise in the prices as the formulation of property price bubble and it was somehow expected that this bubble will be burst and the prices of the property will come down.
The review of the related literature explains how the global financial crisis in 2007-8 finally burst this bubble and receiving the immeasurable impacts of this crisis, the Dubai real estate market gone through the phase of recession. The prices of the property started falling in the city rapidly as the crisis hit the global economy. It is found from the secondary analysis of data that Dubai received very serious impacts of this crisis because the banking sector was badly affected and the lack of adequate financial crisis stopped the development of the real estate sector. Many of the business organizations stopped their working in the city and many other reduce the number of their employees. As a result, there was massive job loss in the city and many of the workers have no other way in front of them rather than leave the city and go back to their homeland. Due to this trend, the demand for the residential property was also massively fall because the number of people seeking residence in the city was significantly reduced. As a result, the real estate companies have no option in front of them to reduce the prices of the property in response to the decline in its demand.
It is found that at present, the construction of many of the projects has been stopped in the city and many o f the major projects are failed due to lack of interest of the buyers. The construction companies are facing great challenge in front of them because they have no financial recourses to meet the expenses of the construction of the building as the banks are unwilling to provide the loans and at the same time, they dont have customers for their residential projects. This situation compels them to reduce the number of the labor and many other companies have decided to roll back their programs. The study of the literature explains the present situation of Dubai real estate sector and its response towards the global financial crisis and many aspects and issues related with the problem became clear as a result of the secondary research.
Along with the secondary research, the dissertation also employs a primary research method to collect data and information about the topic of the research. The survey conducted among 200 participants bring out some very useful results that further explain the current position of the real estate sector of Dubai in response to the global financial crisis. The results of the statistical survey is already calculated and described in the last section. There are different aspects of the issue that were asked from the residents and real estate agents of the Dubai to have more clear picture of the situation and the survey results allow understanding these issues clearly with the help of the responses collected through it.
The primary research reveals that the real estate agents and the residents of Dubai commonly agree with the fact that the real estate sector is one of the major victims of the global financial crisis. 112 of the total 150 survey participants strongly agree with the fact that the crisis affected the real estate industry up to a great extent that shows there is a strong consensus about the effects of the crisis upon the real estate market and there is no doubt about the fact that the recent recession of the real estate sector is backed by the global financial crisis. Thus, the main reason behind the real estate market clash and the role of the global crisis in the scenario became clear from the results of the survey. The survey results also clarify that the real estate agents and the residents of Dubai also witnessed the immediate response of the real estate marker of Dubai towards the financial crisis and it is commonly observed by them that the response of the crisis was very immediate as well as strong.
The primary research allow understanding the views, experiences and opinions of the real estate agents and the residents of the city towards the crisis and it is found that most of the people were expecting that the Dubai real estate market will go under recession as a result of these crisis. The results of the survey show that a big majority of the survey participants agree with the statement that the real estate of the city give away an expected response and they were not surprised by the abrupt fall of the property prices in the city. The people also believe that the residential sector is much affected by the crisis, however, there is a mixed response of the people regarding this matter and there are some people that disagree with the statement that the residential sector is affected more than the other sectors of real estate industry of Dubai. It implies that the commercial sector is also equally important victim of the crisis and the real estate agents as well as the residents have observed that the residential sector is not the only major victim of the situation.
As the crisis hit the city, the investors and the buyers immediately stopped getting involved in new contracts and deals. The real estate agents and the residents of the city shared their experiences that due to the uncertainty in the marketplace, the buyers became worried about their money and they stopped taking interest in any agreement. As a result, there were little agreements done between the buyers and the sellers of the property even during the initial days of the recession. The high level of business uncertainty spoiled the market and the buyers tend to take their money out from the market rather investing it. The participants of the survey were also commonly agreed with the fact that Dubai is highly affected by the global crisis and as compared with any other state of UAE, the effects of the crisis were worst of the real estate market of Dubai. The residents as well as the real estate agents commonly observed that the other states of UAE didnt get as much serious affects of the crisis as the Dubai real estate market got.
It is also found that the people are not sure about the recovery of the Dubai real estate market from the shocks of the global financial crisis because 43 of the survey participants were not agree neither disagree with the statement that the city is recovering from the crisis slowly. It shows that the people are still not sure about the market conditions and their trust is still shaking. Some of the real estate agents as well as the residents do believe that gradually improvement is occurring in the situation, however, at the same time there are many people who dont observe this improvement and they disagree with the expression that the Dubai real estate market has started the recovering phase. It shows that the bad time is not exactly over for the city till now and the residents and the market experts still see the shocking effects of the crisis upon the market.
There are different areas in Dubai where the property was being sold at premium prices and several other areas were affordable for the middle income group as well. As the crisis hit the city, the prices of the property went on declining in all the areas but the real estate agents and the residents participated in the survey observed that the trend of the property price fall is different from different areas of the city. The people share mixed response regarding this matter and it is found that the property prices fall in different areas of the city but the rate of the fall was different for different areas. It also affirms the findings of the secondary research that the luxury residence was more affected by the crisis as compared with the low level residents because the prices of the luxury residential projects was much declined as compared with the small housing projects. The real estate agents and the residents of the city are found commonly agreed with the trend that the prices of the luxury areas are decreased more as compared with the other areas.
Most of the property seller responded to the crisis and soon they offer their property for sale at lower prices, however, it is found that even after this changed strategy, the sellers failed to attract the customers. 92 percent of the survey participants confirmed that even after the fall of the property prices in the city, the buyers remain uninterested in purchasing the property and the lowers prices of the property fail to bring money in the market. The people also believe that the lack of confidence of the buyers over the conditions of the market is also a big failure of the government. The survey participants commonly believe that the government failed to formulate and implement such strategies that can work to regain the confidence of the investors upon the market conditions due to which the situation became worst with each passing day. Thus, the government policies and inactiveness in the entire scenario is widely criticized by the people on the basis that all of the policies born no results and there was no improvement observed in the situation resulting from the strategies and policies of the government of UAE.
The recovery of the Dubai real estate market is an important as well as debatable issue for the real estate agents and the residents of Dubai. The market experts and the residents share mixed opinion about the matter and there are many people who are not very hopeful about the future of the real estate market of the city in coming days. Very few of the survey participants believe that the market will recover soon from the shocks of the crisis and 66 of the participants were disagree with the view that the fast recovery of the market from the aftermaths of crisis is possible. These opinions show that the people are not very much hopeful regarding the market conditions and they think that the city needs much time to stabilize itself again.
The government being an important player of the scene is regarded as responsible factor behind the recession of the market and there are many people who think that the crisis stayed for long in the real estate sector mainly due to the failure of the policies and strategies of the government. Many of the survey participants share their views that the policies of the government failed to address the issue properly and thus, the government is also responsible for the recession of the market. Despite this criticism, the people havent lost their hopes and they still believe that the government can do something positive for the market even now. Many of the survey participants believe that the situation is not totally out of the hands of the government and it is still possible for the government to take the control of the problem through effective policies and strategies.
The response of the real estate market seems to draw negative impacts upon the entire economy and the business activities. However, there is another side of the picture that tells that there are some people who are benefited from this recession that causes the down fall of the property prices in Dubai. There are people from different under developing countries living in Dubai. These people stay here in hope of better employment opportunities however, it was getting difficult for them to meet the residential expenditures because the prices of the residential apartments and villas were rising at high speed. As the property prices bubble burst in Dubai, these people find it easy to manage their residential expenses because they can now get the houses at pretty low prices. Many of such people have their jobs secure as they were associated with industries other then the banking, real estate and insurance. For example, the people related with the telecommunication sector faced no major problem in term of the cut down of working hours or downsizing of their organizations. These people having a secure job in their hands find it easy to get better living arrangements by paying even less prices as they were paying before for low level of housing. It shows that there are some people who have got the advantage of the price reduction in the residential property of Dubai.
It is revealed from the study that the crisis drew multifold impacts upon the real estate market of Dubai. These effects are direct as well as indirect in nature. The direct effects of the crisis are visible in form of the reduced prices of the residential units in different areas of Dubai and the availability of the residential opportunities in the city in big numbers. The indirect effects of the crisis can be seen in the form of unemployment because there is little business for the construction companies and the real estate companies now days so they dont need huge staff to manage the work flow. As a result, the construction companies and the real estate companies have adopted the strategy of downsizing so that they can cover the expenditure and losses that they face due to lack of demand of the property in the city. The commission of the real estate agents is also reduces and as a result of less numbers of buyers coming to them they remain ready to work for the buyers even at low commission. There are many building in the city that were on the last stage of completion and it was expected that within one or two month these buildings will be ready for sale however, when the crisis turned the situation totally inverse, the constructors of these buildings also decided not to complete the building because they see it already that even if they complete the building they will get no buyers or they have to sale the residential units at very low prices that will considerable effect their profit rates.
The construction companies have also hired low level labor from different other countries from where they can get the labor for low salaries and wages. These company shave also arranges the visas for these people but as they see that they will not need these people any more they become unwilling to complete with the visa provision process of the labor and as a result the visas of many of the people related with the real estate sector are also been canceled by the government due to the request of the companies that earlier applied for these visas. This trend shows that now there is less demand of workers and labor in the real estate and construction sector. The people willing to approach Dubai to get some employment in these sectors also face abrupt disappointment because the people already present in Dubai and attached with these sector find no way for themselves so in this situation there is no room for the new comers. It is widely advised to the people from other countries that they dont have to look towards Dubai at this time in search for the employment in real estate and the constructions sector because both of these sectors are not in need of labor any more at present. In fact, the existing labor is very uncertain about its future in the city and there is great level of worries among the people as they see themselves that there is less work in the sector so in coming days the companies might not need them and they will go to lose their jobs very soon.
Hence, the above analysis of the secondary and primary research findings affirms that the experts, real estate agents, social scientists, newsmen and the residents of Dubai have commonly witnessed the strong and negative impacts of the global financial crisis upon the real estate sector of Dubai and all of these people have also observed the fall in the prices of the residential property in most of the areas of the city. The analysis of the secondary and primary research shows that there are little contradictions in the existing literature and the opinions of the residents and the real estate agents matched with the observations of the social scientists and the reports of different newspapers and magazines. The analysis of research findings explains certain issues and aspects of the topic of the dissertation and enables to answer the research questions.
5.3. Answering the Research Question
The core objective of the research is to find out the answers of the research questions formulated at the beginning of the study. The data and information collected from different resources has been analyzed and interpreted in order to find out enough insight of the issue that enables to answer the research questions. Thus, in the light of the finding and analysis of the research study, the dissertation presents the answers of the research questions in this section. There are total three main research questions formulated for the study. The first research questions are about the role of the global crisis in the real estate marker recession all over the world. The answer of this question was attained thought the secondary analysis of data successfully and it is found that all over the world, the real estate markets have received the aftermaths and shocking effects of the financial crisis. In many of the countries like US and China, the real estate bubble has also burst due to the unavailability of credible financial resources. It is found that the real estate markets of different countries went under the phase of recession mainly due to the unwillingness of the banks to provide credits. The lack of loan and credit availability hinders the ways of the buyers to make contracts and sales deeds of property due to which the buying of property is massively decreased all over the world. the decline in the property demand ultimately take the property prices at low level and in many of the countries, now the residential as well as commercial property is available for sale at low prices but the people are not interesting in buying it.
The second research question is about the effects of the global crisis on the Dubai real estate industry. The secondary analysis of data as well as the primary research results and analysis explicitly discussed this issue and it is found that the effects of the global crisis are very clearly visible upon the real estate market of Dubai. Soon after the crisis, the investors and the buyers stopped making new property deals as the banks also stopped providing credits and loans. The real estate industry not only witnessed the effects of the crisis in terms of the decline in the prices and demand of the property but also there was massive job lost in the sector because many of the construction companies stop the construction of the buildings and they have to cut down the number of the their employees due to reduced volume of the work. This situation compelled many people to leave the city after losing their jobs and businesses. Many of the real estate agencies were closed due to the drastic effects of the crisis upon the industry. Thus, the answer of this research questions is successfully found from the analysis and discussion of the secondary and primary research findings.
The third research question of the city is about the effects of the crisis upon different residential sectors of Dubai. The issue is explored specifically in the primary research and it is found from the responses of the residents and the real estate agents collected through the statistical survey that different areas show different trend of property price fall. Though all the areas witnessed the fall in the prices of the property but the luxurious areas with big housing arrangements were more affected from the crisis as compared with the low areas. It shows that different residential areas of Dubai show the fall in the prices of property in different manners. In this way, the research attained the answers of all the three decided research questions and the secondary and primary research findings and analysis allow providing detailed and satisfactory answers to all the research questions.
5.4. Testing the research hypothesis
Along with searching the answer of the research question, the research study also strive to test the following hypothesis in the light of the findings of the secondary and primary research.
Hypothesis I
Dubai needs more than five years to recover from aftermaths of global financial crisis
This hypothesis is tested in the view of the analysis of the secondary and primary research findings and it is found that the residents, real estate agents and the social scientists commonly believe that Dubai real estate sector needs more than five years to recover from the destructive effects of the global financial. It is found that the effects of the crisis seem to long lasting on the industry and thus, this first research hypothesis is found correct in the current scenario.
Hypothesis II
The ineffective policies of the government are the responsible for intense response of Dubai real estate market towards the Global financial crisis
This hypothesis is based upon the examination of the role of the governments policies in the situation and it is found that there is some level of dissatisfaction among the residents and real estate agents regarding the role of the government in the perspective. However, the review of the current literature shows that the government is not the major responsible factor behind the scene but it is due to the dependency of the real estate market upon the financial instruments that resulted in such a massive loss to the industry. Hence, this hypothesis is found incorrect in the light of the research findings because some of the efforts of the government are also underline in the secondary analysis of data that show the government is willing to bring some level of improvement in the situation.
Hypothesis III
The buying and selling within the residential sector of Dubai real estate market is more affected from the global financial crisis as compared with other sectors of the industry
This hypothesis is also tested in the light of the research findings and it is found that the residential sector is among the affected sector and the commercial sector also face major setbacks from the crisis and it cannot be said that the residential sector is the most effected sector of Dubai real estate industry. In this way, this hypothesis is also found incorrect after conducting a detailed study of the entire situation.
Hypothesis IV
The active role of western companies and investors in Dubai is the main reason behind intense response of the Dubai real estate market towards the global financial crisis.
It is found from the research that the foreign companies use to invest lot of money in Dubai due to the growth importance of the city as the IT and economic hub of Middle East. The increasing interest of the foreign investors raised the demand for the property in the city and after the crisis when these foreign investors become unwilling to invest the city received intense effects from it. In this way, this research hypothesis is found correct according to the research study.
5.5. Summary
The chapter explicitly presented the analysis of the research findings and the analysis is further use as guideline to provide the answers of the research questions. The research hypotheses are also tested in this chapter to assure that the research study has achieved all of its objectives. The chapter contains the major part of the dissertation because it connects the findings of the research study to its objectives and presents the logical evidences for each of the research work conducted for the study.
6. Conclusion
The chapter presented a detailed but concise summary of the entire research work done for the dissertation and also contains the conclusion to sum up the entire research work in order to provide a logical ending to the entire effort. The first section provides a quick overview to whatever is done to accomplish the task of this research study whereas the second part of the chapter contains the concluding remarks regarding the work done.
6.1. Research Summary
The dissertation presents the report of a qualitative research study that aims to study the effects of global financial crisis upon the buying of the property within the residential sector of Dubai real estate market. In order to study these effects, the research study employs two research methods including the secondary analysis of data and case study. The data and information for the case study has been collected through different secondary as well as primary resources. The review of the related available literature of conducted to have an insightful analysis of the existing situation. At the same time, a statistical survey is conducted among 100 real estate agents and 100 residents from different areas of Dubai in order to know about their views and experiences regarding the aftermaths of the global financial crisis upon the real estate market of Dubai.
The secondary research informs about the importance of the Dubai real estate market and explains the factors behind the growing importance of the residential sector of the city. It is found that because of the geographical and economic importance of the city, the investors and businessmen from all around the world seek different business opportunities here due to which it became the home for the people belonging to many nationalities. There are people lining in the city coming from different developed as well as under developed countries. These people live under different circumstances and look for residence that can meet their economic conditions. Due to this reason, there is wide variation in the property prices in different areas of Dubai however, the demand for the property raised its prices almost in all the areas. This highly diverse populated city is an important economic and shopping destination and the demand for residential property also reached high level along with the increment of the foreign people approaching the land for varied purposes. In many of the areas of Dubai, the prices of the property became too high, especially the luxury living touches its peak before the global crisis and there was a real estate price bubble created in the city. The real estate market experts were expecting that this bubble might burst as a result of any incident and this expectation was well met by the global financial crisis.
The credit crunch all over the world affected the real estate industries and Dubai real estate market responded towards this crisis in more intense and immediate manner. The banks immediately seized the process of landing loans to the investors, constructors and general people. As a result, there was great shortage of finance coming to the real estate sector. The construction work of many of the mega residential projects in Dubai was also badly affected and the companies stopped the construction of the projects while looking at the response of the finance providers and buyers. The situation also resulted in the unemployment of many of the people associated with the real estate sector. The people who had invested their money in the real estate sector also faced great loss. The property prices were declines in almost all the parts of the city. The residential sector was especially affected by these crisis and the prices of the luxury residential area was decline to higher rates.
In this way, the secondary analysis of data assists in gaining detailed understanding of the current situation and explains the aftermaths of the crisis upon the industry from different perspective. Along with the secondary analysis of data, the information is also collected for the study through a statistical survey. The responses of 100 real estate agents and 100 residents of the city are collected through a structured questionnaire that was constructed using the Likert scale. The answers of this questionnaire are calculated and analyzed to given meaning to the numbers and it is found that most of the findings of the secondary research are further confirmed by the primary data because there was little contradiction found in the facts and information gathered through the review of the literature and the results of the statistical survey.
The primary research clarifies that the real estate industry experts as well as the residents of Dubai were expecting the intense and immediate response of the real estate market towards the global financial crisis because it was very obvious that the destabilization of the financial market will disturb the pace of growth and development of the real estate market of Dubai. The real estate industry experts and the residents also witnessed the decline in the prices of the property in different areas of the city and the participants also share their experiences that the people lose their jobs in large number and decided to return to their homelands due to which there is great decline in the prices of the property. At present, there is lot of residential opportunities waiting for the buyers at low prices but despite these low prices, the buyers are not attracted towards these properties and in turn the construction companies and the builders are facing heavy losses. There is no considerable improvement occurred in the situation yet and it is expected that the city will need more than five years to retain its position as a flourishing real estate market of the world.
The analysis of the secondary and the primary research is done to fine out the answers of the research questions. There were three research questions formulated at the starting of the study that were based on the main objectives of the research. The answers of these questions were easily searched with the help of the analysis of the research findings. The research study clarifies that the global crisis became the base for the recession of the real estate markets not only in Dubai but all over the world. the effects of crisis upon the Dubai real estate market are also explored in details from different perspectives and it is found that different areas of Dubai are affected from the crisis, however, the luxury residential areas are more affected and the decline of the property prices is high in these areas as compared with the other areas of the city. The negative impacts of the global financial crisis upon the real estate market of Dubai have also resulted in depression among the people. many of the industry giants when see they their heavy investments are being wasted as a result of these crisis, they found no other way rather to wrap-up their businesses and look toward another destinations where they can manage a low cost living.
Along with answering these research questions, the dissertation also tested the research hypotheses that were also decided at the beginning of the study. The testing of the research hypothesis clarifies that the experts and the general people dont believe on the fast recovery of the real estate market of city and most of the people expect that it will take more than five years to retain the stability of real estate market. The government is also criticized by some people however the main player of the situation doesnt seem to be the government and its policies that led to the recession of the real estate market in Dubai. It is also proved from the testing of the research hypothesis that all other sectors of Dubai real estate industry are affected by the crisis and the residential sector is not the top most and alone victim of the situation. The presence of many international companies and foreign investors is also identified as a reason behind the immediate response of the market towards the crisis. All of these research findings, their analysis, answers of the research question and the testing of the research hypothesis imply that the research study successfully attained all of its objectives by answering the research question and by testing the research hypothesis.
6.2. Conclusion
The dissertation explicitly discusses the issue of effects of the global crisis upon the real estate sector of Dubai while focusing on the residential sector buying. The discussion presented in the dissertation is well supported by the findings of secondary and primary research. The entire research work can be sum up with the conclusion that the global financial crisis affected the real estate markets so immensely because the financial instruments are the fundamental requirements for the growth and development of the real estate sector and the unavailability of the financial resources results in the recession of the real estate market all over the world. Dubai is also very much affected by the global financial crisis because the investors from all over the globe use to invest their money in different projects of the city and the immediate reaction of these investors in term of discontinuing the investments broke the backbone of the UAE economy. The demand for the residential property was drastically declines that result in the reduction of property prices.
The dissertation explores the effects of the global crisis upon the residential sector of the Dubai real estate and reveals that the buying of the residential property was declines after the crisis due to some important factors. These factors include the closure of many international companies in the city that led to the exile of their employees from the city and hence the residence under their usage became free. The most important factor is the unavailability of finance through the banks and other landing institutions due to which the buyers became unable to purchase property in Dubai. The buying of the property was also affected due to the uncertain conditions of the economy that insist many of the people of under developing countries to return back to their homelands after closing of the work of many construction companies. In sum, it is found that the trend of the buying of the residential property was completely reversed after the global financial crisis. The residential areas that were out of reach of many people before the crisis were offered for sale at relatively very low prices but despite their low prices, there were few buyers interested in these properties due to the uncertain market conditions as well as due to lack of financial support from the banks. Thus, the global financial crisis drastically affected the buying of the residential property in Dubai that contributes to the recession of the real estate market of Dubai.
Though all of the key objectives of the research study are achieves successfully through the employment of a qualitative research approach, however, there are some limitations and problems also faced during conducting the research study. First of all there were major problems faced in collecting the responses from the real estate experts and residents of Dubai. There was an agreed time of three month for the collection of the questionnaires but even during that time all the questionnaire were not returned and 150 out of 200 responses were finally calculated for the survey. The questionnaire of the survey was kept small in order to encourage the participant to fill it within short time period but despite this arrangement, many of the people avoided to take part in the survey. Many of the people approached show their unwillingness to fill them due to shortage of time and their engagements in some important matters.
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