Colliers International's house price index for Q3 2008 points to an average growth of 80% on the same period last year.
What is most telling, however, is that growth figures for the quarter were only 5%, compared to the 16% seen in Q2.
If the fall in prices being currently witnessed continues, which include up to 40% drops in some top end developments – and an HSBC statement that prices had fallen by an average of 4% across the board - the report on Q4 is likely to make grim reading as the situation on the ground changes daily, something admitted by the report's authors.
'It is clear to us that the landscape has changed significantly since the end of September. A new factor, namely a shortage of liquidity caused by the international financial crisis, has impacted the market.
'Over the past three quarters the rate of growth has slowed to the point where we expect overall price growth to enter negative territory in the fourth .'
In light of the financial crisis, access to liquidity for private investors has all but dried up. Amlak, the country's largest lender, has frozen all new requests pending revaluation of its terms as it undergoes a merger with erstwhile rival Tamweel, while local banks have raised the criteria on minimum down payments and interest rates.
Further to this, the current strength of the dollar, to which the dirham is pegged, has meant that prices have risen by approximately 20% for investors from the EU and UK, making the previous inflated rates far from attractive.
A report by UAE-based real estate asset management company RichVille breaks the situation down even further.
Supply-demand balance shift
On the positive side for current and prospective investors, the RichVille report points to a shift in balance brought on by the financial situation: 'Although the overall economic growth in Dubai is expected to slowdown, which might result in lower than expected population growth and therefore lower demand on properties, it is expected that the supply of properties will decline in a much greater percentage due to delayed and cancelled projects.'
RichVille categorises Dubai's upcoming properties into two principal categories; those launched before Q4 2007, and those launched during or after.
The prices of the former are expected to increase, so long as the developer is reputable and the location good: 'A worst case scenario will see these projects maintaining their value for the time being but increasing over the mid to long term. Most of the future demand in the market will focus on these properties (especially if they are completed or at an advanced stage).'
Lower investment returns
For the latter the outlook is more sombre: 'They are already overpriced and were – until recently – appealing mostly to speculators. Depending on the classification of the project, these will in the best case scenario maintain their current prices but with a good chance that their prices will drop in the midterm.'
The report underlines the expected shift from short term investors to end users and long term buyers who are willing to pay up to 35% as a down payment, and finance for more than 20 years, concluding: 'Mid term investors will be able to find excellent opportunities in the market but they will need to also pay higher down payments and settle for lower returns than they used to during the 'boom' period.'See also:Dubai developers feel the effects of price uncertaintyDubai's off plan projects 'on hold' through lack of financing