Dubai property prices declined nearly 50 percent in the last year, according to a new report, making it the worst performing real estate market in the world.
The latest Knight Frank Global House Price Index for Q3 2009 surveyed house prices in 42 countries and Dubai was the worst performer on the list, with prices falling 47 percent year-on-year.
The index showed lower prices in 57 percent of the world's residential property markets, with Dubai prices falling the most.
The second worst year-on-year performer was Estonia with a 35.8 percent drop while Thailand recorded the worst quarter on quarter fall of more than 13 percent, the research added.
Liam Bailey, head of residential research, Knight Frank, said: "Prices in Dubai have fallen the most, despite posting a small recovery (1.2 percent) in the third quarter [compared to Q2]. The recent debt issues with Dubai World and the subsequent loss of confidence by investors means even this nascent rally is already under threat.
"House prices are now rising in a clear majority of locations around the world with almost 70 percent of the locations in the Knight Frank Global House Price Index reporting growth in the third quarter of 2009. This compares with under 50 percent during the second three months of the year," he added.
Quarterly figures for the third quarter show Dubai rose 1.2 percent compared to the second quarter.
Vincent Easton, sales director at the Dubai-based office of the Engel and Volkers property agency, said that the debt crisis has actually led to a rise in inquiries.
"It is strange - the old adage that any publicity is good publicity applies here. People assume [investors] wouldn't touch it with a barge pole but people's lust for opportunities knows no boundaries," said Easton.
He said he was seeing interest among investors who are looking to take advantage of the crisis and this is evident in official data from the Dubai Land Department.
Figures show that the value of land transactions for the four days leading up to Wednesday Nov 25, the day of the Dubai World announcement, was Dhs223,294,841 ($60.7m). This week, as the market reopened after the national holidays, the value of transactions between Dec 5-8 was Dhs182,340,074, a difference of just 18 percent.
While the data showed that the short term impact has not been as severe as had been anticipated, Easton believes "there is a large degree of uncertainty hanging over the market and how long that lasts we are yet see."
This uncertainty has not been helped by recent negative news for some of Dubai's biggest master developers. Nakheel reported that it had made a loss of $3.64bn in the first half of this year and Emaar Properties had its credit rating downgraded by the Moody's ratings agency.