House prices in Dubai will continue to fall this year, according to Jones Lang LaSalle, after falling -12% in 2010 and -25% in 2009. The company reported that 25,000 new units will be completed and put on the market in Dubai this year, compared to just 7,800 last year. It added that any expected increase in purchasing transactions will be offset by the continued oversupply of new housing.

As a result, price falls could exceed those seen last year and already in January 2011, property prices fell by -1.9%, while rents dropped by 0.7%, according to Deutsche Bank. If prices continue to fall at that rate for the rest of this year, it would equate to prices falling by 20-25%. This would mean that a UK property investor buying in January 2009 would have seen the value of their Dubai property half in value in just three years.

However, property prices in Dubai are already -60% down from their peak, according to analysts at Deutsche Bank, with many predicting a further fall of at least -10% over the next two years as fresh supply floods the market.

In oil-rich Abu Dhabi, which weathered the financial crisis better than Dubai, prices have already fallen -45% from their peak.