Dubai's housing market still has nearly a third too much supply and prices will plummet by another 10 per cent, a Reuters poll showed on Wednesday.
Residential property prices in the emirate will fall 58 percent from a peak in the third quarter of 2008 according to the median estimate of 11 banks, investment firms and research institutions.
Rentals will, however, fall by five per cent in 2011 and one per cent next year, the median forecast showed.
Abu Dhabi rentals are expected to drop 10 percent this year and two per cent in 2012.
Sajeer Babu, an analyst at National Bank of Abu Dhabi, said: "Despite increasing transaction volumes and improvement in economic activities, property prices in Dubai are expected to be under pressure due to oversupply."
The findings matched those of a Reuters poll in April which showed that existing supply and “additional new units” would push Dubai's house prices down by 10 per cent.
The Dubai Land Department had told Emirates 24|7 only 10,000 new units will be delivered in the year, compared to some of the international property consultancies putting the number at over 30,000 to 50,000 additional units.
Sheikh Maktoum bin Hasher Al Maktoum, President, Al Fajer Properties, had told this website in June that Dubai would receive a “very limited” supply of properties this year.
“I am expecting very limited supply to come into the market… there isn’t that much supply. We are in construction field as well and we haven’t been getting any orders for the last three to four years,” he had said.
Property consultancy Jones Lang LaSalle (JLL) said in its recent report that18,000 new homes expected to hit Dubai's market by year end.
UBS, the biggest Swiss bank, said last year that it estimated housing supply by end of 2011 to be roughly 360,000 with oversupply potentially at 150,000 residential units.
In March, Real Estate Regulatory Agency CEO Marwan bin Ghalita said 220 projects were moving forward and they were constantly evaluating projects.
Earlier, he had said that over 220 projects had been cancelled and the number was expected to rise this year.
Respondents in the Reuters poll saw zero chance of Dubai's residential property market recovering in 2011. They gave just a 25 per cent chance of recovery in 2012 and only 50-50 per cent in 2013.
Only one respondent said house prices in Dubai have already reached a bottom. Three said they expected prices to reach a trough in 2011, while others said 2012 or later.
JLL said their survey of top 30 financial institutions investing in regional real estate markets revealed that even as Dubai rents continued to fall, the rate of decline had slowed significantly and indicators showed some locations and sectors are either at, or near, the bottom.
Abu Dhabi is now facing challenges as a huge supply of high-end homes are expected to enter the market. Still, prices in Abu Dhabi are expected to fall another 15 per cent from here, or 55 percent from their peak, the median estimate showed.
"In Abu Dhabi there is actually an undersupply across the market ... in that there are more households than dwellings," said Craig Plumb, head of research at Jones Lang LaSalle Mena.
"The problem is one of pricing - many of the households cannot afford the units being offered to the market. This has resulted in there being both an undersupply (at the aggregate level) and an oversupply (of expensive units) at the same time."
JLL expects handovers will increase significantly in the second half with up to 14,000 units scheduled for completion.
Last month, the UAE federal government announced that it would give a three year residency visa to property buyers in the UAE instead of the six-month visa, a move seen as an attempt to lure investors back into its struggling real estate sector.