The whirlwind of rumors surrounding Dubai’s financial crisis emerged seemingly out of nowhere. Though it’s no secret that the US recession has also left its imprint on the shores of Dubai, the flush coffers of the once oil producing state seemed more than adequate to quell any economic worries. One must admit that the housing and financial sectors have been the worst affected, since the downturn in economic activity has first and foremost affected these drivers of Dubai’s economic growth.

There was a time when it seemed that construction would never stop in this glittering emirate. The sound of a drill, a hammer and a chisel were among the most ubiquitous that one could hear in the still of the afternoon or the dead of the night. Now it seems that all is quiet and desolate, with the majority of expatriates having left on the heels of an unemployment spree. Prices of residential, marina and villa properties have come down from artificial highs. Hotel rates and private single and sharing room rentals have also followed suit. It seems the best of Dubai’s six year housing and construction boom is behind us.

Once the reality sank in, the Dubai hotel industry was in for a shock. Dubai’s urban planners had already planned for quite a number of hotels in Dubai, and as a result have overestimated hotel needs. Take Asia-Asia, planned to be the world’s largest hotel with 6500 rooms, part of the Badawi Project at Dubailand. Then again, the rentals of many hotels in Dubai are still on the higher side, even in the eyes of Westerners. There was a recent report stating that Dubai office space is the tenth most expensive in the world. Clearly, to revive the sagging economy, Dubai will have to make a lot of things more affordable. This will include everything from parking fees to the general cost of living not only for Western expatriates but also for the Indians, Pakistanis, Bangladeshis, Filipinos and a host of other nationalities that manned its various business sectors from shops to supermarkets. Otherwise they will simply not be induced to come back.

So whether one looks at apartment hotels in Dubai or indeed, any other sort of rental or living establishment, it will be some time before we can hope for Dubai hotel bookings to full capacity once again. In fact in the present crisis scenario, many if not all Dubai hotels have slashed their rates to increase the possibilities of booking more rooms for longer periods. There is fierce competition to survive in Dubai’s hotel industry nowadays and the intending customer or traveler will be the better off for it.

It is clear that a healthy recovery of the economy and the hotel industry will depend on a host of factors such as cost of doing business, investment, construction and trading opportunities, employment and housing and apartment rentals. Meanwhile it is reported that rentals for residential properties in Dubai have fallen 38 percent since the beginning of 2009, with an 18 percent decrease in Abu Dhabi.

On the positive side, the recent increase in investor activities is an evidence of recovery. Previously excess liquidity and easy monetary policy had resulted in the interest rates being considerably low. Due to dollar depreciation, money was flowing out of banks into real estate and property. It will take a little time for investors to regain confidence in Dubai property once again.