Dubai's real estate sector will bottom out in the first quarter of 2012, according to a new report published by the emirate's business group.
The Dubai Chamber of Commerce and Industry study said oversupply was the main reason for prices declining so dramatically in the past two years.
"A robust rebound is expected at a slow pace as it may still take 2011 and the first quarter of 2012 for the sector prices to bottom out," the study said.
But chamber officials conceded that the property market was "unlikely to return to pre-crisis sales or rental growth rates in the foreseeable future".
"The real estate sector will remain under stress due to the onset of massive new supply," it added.
Officials also said the recovery and future growth in Dubai's real estate market was "subject to some positive changes in market regulations and implementation of existing laws that can ensure transparency by putting in place the appropriate disclosure measures".
The study also said the recovery in real estate demand would be driven by the completion of "world class infrastructure and a business friendly environment".
It said Dubai's house price index, which includes prices and rents for apartments and villas, registered a one percent increase in Q4 2010 compared to the previous quarter.
On an annual basis, the index witnessed an overall decline of about six percent in value when compared against Q4 2009, it added.
The study said the total supply percentage share of homes in Dubai was about 79 percent apartments and 21 percent villas.
According to Jones Lang LaSalle, approximately 36,000 residential units were completed last year, bringing the total residential stock to around 309,301 units by the end of the year.
In 2011, it is expected that about 25,545 units will be completed, implying that the new supply of residential properties in Dubai is expected to slow down by about 30 percent compared to 2010.
The Dubai Chamber said diminishing lease and occupancy rates have resulted in some landlords being willing to absorb service charges on behalf of the tenants, while others are offering rent-free periods as an incentive.
"Other landlords are offering rates of 10-12 percent below prevailing market levels in order to secure tenants willing to pay their rent a full year in advance," its study added.