DUBAI: Dubai house prices, already nearly 60 percent off their peak, are set to drop another 10 percent over the next two years as new units are released onto a market awash with supply, a Reuters poll shows. A property boom in Dubai collapsed at the end of 2008 when it was hit by the global financial crisis and the Gulf state's debt crisis. Residential property prices in the Gulf state, home to the world's tallest building which has 900 residences, have plunged 58 percent from their peak in the fourth quarter of 2008, according to the median estimate of 15 banks, investment firms and research institutions. Prices in Dubai and Abu Dhabi will fall 5 and 10 percent respectively in 2011, according to the poll, which was taken over the past week. The decline will continue in 2012 with prices in Dubai falling 4 percent and in Abu Dhabi by 5 percent, according to median forecasts. Abu Dhabi, the United Arab Emirates' capital and home to most of its oil, weathered the financial crisis better than Dubai but now faces an oversupply of property. Prices have already fallen 45 percent. "In Abu Dhabi, we expect transactional activity to increase as stock is handed over on Reem Island. However, the market being relatively small and, in our opinion, the stock exceeding the potential buyers, prices will drop further," said analysts at Asteco Property Management. In the latest sign the property market is struggling, the Abu Dhabi government has stepped in with a $5.2 billion aid package to the state's largest developer Aldar Properties to help the company meet looming debt obligations. Analysts do not see Dubai's residential market bottoming out until the second half of this year at the earliest. Four analysts polled said Dubai's house prices would hit bottom in the second half of 2011. Three said the market would hit a trough in the first half of 2012 and another three said the market would not hit bottom until the second half of 2012. "The market will continue to adjust in the short term, even if demand has started to pick up, as local banks are still averse to real estate lending and supply continues to increase," said Patrick Rahal, senior equity analyst for asset management at The First Investor. "We anticipate a continuation of rising vacancy ratios. However, this will depend on the asset type, quality and location." Rents fall further Residential rents in Dubai are seen falling 10 percent this year and another 5 percent in 2012, as more homes come onto the market, forcing landlords to reduce rents to attract tenants. Developers are also keen to complete projects and get payments. Deyaar, Dubai's second-largest property developer by market value, said it hopes to boost its liquidity by releasing five projects costing more than 1.2 billion dirhams ($327 million) in the first quarter of 2011. It would put 1,092 residential and commercial units in the up-market Business Bay area on the market. Rents in Abu Dhabi are set to fall 13 percent in 2011 and 5 percent in 2012, according to a median forecast of 12 analysts.
