Year-on-year Dubai property price fall hits 9%

The completion of new supply has meant that the properties worst affected are in units that have come online in the past six to nine months, mainly in areas such as Business Bay, Jumeirah Lake Towers and, for commercial units, the Tecom areas.

In terms of lease rates for residential properties the report states that the year on year decline from Q1 2008 to Q1 2009 stands at an average of only 9%, although the downward change from Q4 2008 to Q1 2009 is much larger, an average of 23%, reflecting the enormous price gains seen in the market throughout the first nine months of 2008.

Predicting when the market will bottom out is complicated by the fact the real estate sector in Dubai as elsewhere is largely sentiment driven.

'You still have a number of investors who bought a lot of property, and are probably willing to sell some of it at a very low rate in order to recoup part of their costs,' Matt Green, Associate Director for research and consultancy at CB Richard Ellis told AME Info.

'I don't think that we'll see units going for much below the original price, but each case is a reflection of the investor rather than the market. There is such a level of negative sentiment at the moment that if some investors are wiling to go lower in terms of sale prices then everyone else does.'

The number of property transactions has also witnessed similar declines, in both off plan and ready built units. Data sourced from the Dubai Land Department shows a drop in the number of sale transactions from 1,486 in Q1 2008, to just 595 in Q1 2009, a drop of approximately 60%.

'What we're looking for in order to gauge the turn is a period of stability, both in terms of selling prices and rental figures, but it's hard to see that happening before the end of the year.'

Offplan properties have borne the brunt of the effects of the downturn, with speculative investors in particular defaulting on payments or selling units at close to original prices. While the speculators have been replaced in the market by end users and investment funds, these are adopting a 'wait-and-see' approach and concentrating on units that are either finished or scheduled for completion within the next 12 months.

'The new supply that has been planned to come online over the next couple of years is going to put severe pressure on the market, especially as demand continues to slow,' said Green.