Dubai residential property prices are likely to fall 10 to 20% this year because of subdued demand, slower economic activity and downbeat investor sentiment, credit rating agency Standard & Poor's said on Monday.
"Slightly lesser demand will come from non-residents," S&P said in a statement. "In early 2015, non-resident demand from Russia and other member countries of the Gulf Cooperation Council was particularly subdued."
S&P expects oil prices to remain weak through to the end of 2016 so that economic growth in the United Arab Emirates as a whole "is likely to slow markedly in 2015 and 2016," according to Reuters.
The agency also warned that a fall in Dubai's stock index would be likely to affect investor views on property. The index is down 10% over the past 12 months, according to Reuters' calculations.
That drop reflects doubts about the sustainability of current property prices, S&P said. "General investor sentiment is key in Dubai real estate because a large majority of buyers are investors."
Greater supply of new residential units will also dampen prices. S&P cited forecasts from property analysts REIDIN that 20,170 new units would be delivered in 2015, nearly double the annual average of 11,600 over the preceding three years.