“2009 will be the year of the downturn,” Markus Giebel, the property company’s CEO, said in an interview at the World Economic Forum’s annual Middle East meeting at the Dead Sea in Jordan. “2010 will be a stabilization year probably, and in 2011 we believe the recovery will happen.”

King Abdullah II is hosting finance ministers, central bank governors and executives from hundreds of companies at the three-day gathering.

Dubai, the second-biggest of the seven states that make up the United Arab Emirates, is facing a slowdown of its once booming property industry as the global credit crisis forces banks to cut back on mortgage lending and speculators flee. Dubai house prices tumbled 41 percent in the first quarter from December, Colliers International said in an April 28 report.

Home prices in Dubai, the Persian Gulf business and tourist hub, have almost halved since their peak in August 2008 and are at the lowest level since the second quarter of 2007, Colliers said. Prices had risen four-fold since 2002 when the government allowed foreigners to buy property in some parts of the emirate.

Deyaar, which put a quarter of its projects in Dubai on hold, will announce a 500 million-dirham ($136 million) property fund to buy distressed assets in the next two to three weeks, Giebel said.

Stabilize prices

It will mainly invest in Deyaar’s distressed properties that have been returned to them and will help stabilize prices, he said.

Dubai’s economy will probably expand 0.5 percent this year, Standard Chartered Plc has said. Growth in Dubai was close to 8 percent last year, according to Raed Safadi, chief economist at Dubai’s department for economic development.

The U.A.E. and five other Gulf Arab states enjoyed an economic boom as oil prices surged and governments invested in real estate and industrial projects to diversify their economies. The six Gulf countries, including Saudi Arabia, Qatar and Kuwait, pump almost a quarter of the world’s crude oil.

Source: Bloomberg