The October Dubai City Profile report, by real estate services group Jones Lang Lasalle, did however include a slightly more upbeat tone, noting that industry insiders considered the worst of the downturn to be over and predicting that the market would stabilise in 2010.
This is attributed in part to the fall in prices re-energising Dubai's competitiveness compared to regional counterparts.
'Dubai has become a more affordable city over the past six months,' says the report. 'It is now recognised that the growth in both activity and asset prices over the past few years was simply not sustainable. With signs that the economy is now 'weathering the storm', there is renewed optimism that Dubai will be able to build upon its first mover advantage to reinforce its position as the region's most competitive city.'
Despite this, the report notes that rents and property values are likely to continue falling through the remainder of 2009, despite the improving investor sentiment, as more units are handed over in the emirate.
The delivery of these extra units is double damaging, as it coincides with a forecast average population drop of 7% to 10% for 2009; while the Dubai Statistics Centre forecasts 5% growth, both EFG Hermes and UBS are more pessimistic – predicting declines of 17% and 8% respectively.
The report also underlines that the anticipated 'metro effect' uplift on property prices in certain developments has yet to be felt in the market. A number of similar unit types in six newly-completed blocks in the Jumeirah Lakes Towers development, at varying distances from a station were monitored for prices increases.
No quantifiable differences were found in rental or sales prices, or occupancy rates. This was attributed to the opening of the transit system being only partial, and the need for usage and transit patterns to become more established. Despite this the report is optimistic that the long term impact of the transport project on real estate values will be considerable over the long term.
With the changing population trend, as unemployed residents have been forced to leave as work visas have been cancelled, coupled with the low investor sentiment, the trends between sales and rentals has continued to vary.
From Q1 to Q3 2009, though sales transactions have fallen by 15%, leasing figures have risen by 10%, driven by relocations from other emirates, upgrades in current accommodation fuelled by the fall in prices and smaller household sizes. While demand for studios and one bedroom apartments has increased, the need for two bedroom units has fallen.
The report forecasts that a further 66,000 units will be delivered in Dubai over the next three years, a downward revision of 27% based on the ongoing delay in delivery or cancellation of a number of projects.
Up to 20,000 of these units are to be completed in 2009, with delivery stretching into Q1 2010 due to some delays.
'The majority of potential buyers are still unable to purchase property ,' says the report, noting that 'cash buyers are able to find good deals since they can negotiate down prices considerably.
During Cityscape Dubai
, speakers during one conference stream pointed to the current high interest rates and lack of variety in mortgage products
as holding back the market. Chris Dommett, CEO of mortgage broker John Charcol Middle East, said: 'There is no differentiation of product between banks as no one wants to be the one to offer something that brings with it a higher risk, although we will likely see a return of buy-to-let products.'
However, he said that recently confidence had started to return to the market, resulting in investors willing to look at purchasing properties. This was borne out by the report, which found that transactional volumes have begun to stabilise, with only a modest decline of 9% reported during Q3 2009. 'While the market is continuing to undergo a price correction, the rate of decline has slowed. Another sign of stabilisation is that asking prices and achieved prices are starting to converge.
'Even if all of the expected units for 2009 are not completed and handed over in time, Dubai's residential market will experience something of an overhang and prices are not expected to recover before the second half of 2010 at the earliest,' the report concludes.