Property prices in Dubai will fall by as much as a further 30 percent in 2010 as the global economy is hit by "a nasty surprise", the Gulf economist who accurately predicted the credit crunch, said on Thursday.
Dr Eckart Woertz, senior economist at think tank Gulf Research Centre, predicted that rather than a recovery being seen in 2010, further global economic misery could be experienced.
"Are we out of the woods (in Dubai? I don't think so. There are so many projects coming on stream. I don't see a recovery... I mean prices are down 50 percent now, so how low can you go? My initial take was a decline of 60 to 80 percent. We have had 50 percent, so maybe we have another 10 to 30 percent to go, measured against the old high," Woertz told Arabian Business.
"A lot of the crash has already happened, but don't think about the old highs, because that is a price you will not see for a very, very long time," he added.
Unlike many economists predicting a recovery from the global economic downturn in 2010, Woertz said that a time lag between state stimulus packages ending and real demand picking up will cause further problems in 2010.
"We have some stabilisation going on, but the problem is this is mainly attributable to government spending and stimulus. But what happens when the stimulus peters out? Because the job market looks awful. So the spending cannot come from private households under such conditions," he said.
"I could imagine that, for the real economy, we are in for a nasty surprise in 2010. We could see several consecutive bottoms, rather than a miraculous recovery," he added.
Even if the global economy does recover quickly, it will not signal the start of an upturn for Dubai's property prices, Woertz said.
"You have high inventories. Just based on end user demand, without the speculative hype, you can probably have quite a few people moving back to the city without the market moving at all. The point is, you shouldn't calculate the price of real estate based on your opinion of the market and the hope that you will sell to a bigger fool than you for a higher price...I would say a year ago, nobody made such calculations," he said.
Woertz, who is currently lecturing at Princeton University in America on Gulf economies and food security, said that the property market downturn could prove to be good news for Dubai in the long run.
"It is good for Dubai that the real estate is going down in the sense that it was pricing itself out of the market... There is still this model of a trading hub, and it is a trading hub. Dubai does things much better than its neighbours. I have just come from Qatar and you cannot compare it, not to mention Kuwait and Saudi Arabia.
"Dubai does things much more efficiently and better than neighbouring countries. There is a need and demand for business services made in Dubai. But not at the price of yesterday which needed to be high because of ridiculous real estate prices," he said.