The value of the UAE construction market fell by 85 per cent over the course of 2008, according to MEED Projects, which tracks project activity across the Gulf.
The latest figures show that just USD14.4bn of contract awards were made during the fourth quarter of 2008, down from USD98.1bn during the same period in 2007.
Over the past five years, the sector has become one of the most important parts of the UAE economy. A recent report by US credit ratings agency Standard & Poor's estimated that the construction and real estate sectors account for almost half of Dubai's gross domestic product (GDP).
Although the last two months of 2008 saw a dramatic fall in activity, the sector has suffered a steady decline throughout 2008 as projects struggled to secure financing in the wake of the global credit crisis. In total, USD191.8bn of contract awards were made in 2008, a 60 per cent drop from the USD482.5bn of awards made in 2007.
Many schemes due to start construction during 2008 have not gone ahead, and many projects that were under construction have been put on hold. There are now USD23.2bn worth of projects on hold, almost 10 per cent of the USD249.7bn of projects under construction.
At the start of 2008, many international construction companies hoped the UAE would be immune from the global economic slowdown. But the year's final months showed the market's fragility.
The first major scheme to be affected by the downturn was Palm Deira, when local developer Nakheel scaled back dredging work in October.
Since then almost every major real estate scheme in the emirate has had the level of construction activity reduced or put on hold.
These include some of the emirate's most well-known projects including Dubai Waterfront, Dubailand, and the Trump International Hotel & Tower, which was launched at a high-profile event in Los Angeles in June 2008, but is now on hold.
Job cuts have also been made. In the final quarter of 2008, thousands of construction professionals were made redundant. Nakheel laid off 500 people in November last year and, since then, there has been a stream of redundancies at other developers and consultants.
In late December, Al-Shafar General Contracting became the first contractor to lay off workers as its clients put projects on hold.
More projects are expected to be put on hold in the coming months, and the low number of schemes being tendered suggests that there will be even fewer contract awards in the first quarter of 2009.
Other markets are also starting to suffer. Real estate developers in Saudi Arabia are now saying that they are starting to see signs of uncertainty there, as investors become more circumspect and anticipate a slowdown in 2009.
"It has been very quiet lately; it seems that a lot of real estate is on hold," says Raed al-Shaksheer, special projects manager at the local Aldar al-Khasa, which is developing the SR800m (USD213m) mixed-use Headquarters Business Park on the Jeddah Corniche.
"There is no movement in buying or selling. People are being cautious, and want to see what the outcome of this crisis will be. They are not sure what is going to happen, so they are holding back."
Nasri el-Helou, managing director for Saudi Arabia at The Land Real Estate Investment & Development in Riyadh, confirms that the sector is displaying caution.
"The kingdom is not as badly affected as Dubai. However, people are being more conservative about investing in real estate. It will take time to get back on track."
Contractors say the slowdown is also impacting on them too. "A lot of clients are waiting for next year's budget  before making further decisions," said Ahmed Qanawati, project manager with the local company, in late 2008.
"Everyone is anticipating a change, but what that is remains unclear," he adds.
In October 2008, it emerged that parts of King Abdullah Economic City (KAEC) were being prioritised by the developer Emaar, The Economic City, amid concerns over the financial climate in the country.
The SR100bn (USD27bn) privately funded project city is one of six economic cities being promoted by the Saudi Arabian General Investment Authority (Sagia) to diversify Saudi Arabia's economy away from oil.
"In terms of Sagia, it is clear they are slowing down," says a source close to the project. "It is certainly very difficult to get anything out of the private developers."
Two of the economic cities have yet to be launched, at Ras al-Zour and Tabuk, and are not expected to make any significant progress in 2009.
"Tabuk is definitely a no-go for the time being," says the source.
"I have heard nothing on that for a while now. I believe they will put them off, maybe not officially, but certainly they will slow them both down."