Potential sellers are probably holding onto their properties while those that are for sale are up to 50% discounted, according to research from Landmark Advisory, the research arm of Landmark Properties.
The price of an apartment in Dubai's most popular areas fell 23% while the price of a villa fell 32% in the first quarter of 2009, bringing them down to levels similar to the fourth quarter of 2007.
The research points to a surplus of property in Dubai. Landmark estimates that 24,000 new units will come onto the Dubai market this year and vacancies caused by expats leaving the city could lead to a surplus of 30,000 to 52,000 units.
Lower rents were also removing the incentive for people to share apartments and prompting more people to commute to Abu Dhabi from Dubai, the firm said in its Quarter 2 Dubai and Abu Dhabi residential real estate report.
The report also says that rents fell between 9 and 41% depending on the area. Dubai Marina was the most popular area for leasing, accounting for 30% of all new annual lease contracts in the city.
Abu Dhabi's primary off plan sector remained frozen, while secondary prices accelerated their decline in the first quarter. The price of an apartment in the capital fell 15 to 20% while a villa declined 25 to 30% in value, but prices began to stabilise towards the end of the quarter.
The Abu Dhabi market will remain undersupplied even if the population only grows by around 2% this year, compared with a 6% estimate under the Abu Dhabi 2030 plan.
However the research indicates that discounts will be necessary not only to sell the remaining inventory but also to prevent defaults by buyers who have only paid 20% and now have an incentive to walk away, it said.
