There are signs of optimism in the country's property market as banks increase lending and prices stabilise in some areas, analysts and brokers say.
While prices slid further across the Emirates in the final quarter of the year, distress sales had dried up and the difference between vendors' asking prices and what buyers were offering appeared to be narrowing.
Mortgages for property held by banks regulated by the Central Bank totalled Dh163.2 billion (US$44.43) at the end of September from Dh141.7bn at the end of 2009, official data show. Majed Azzam, an analyst at Alembic HC Securities, said yesterday that pointed to the fact that "liquidity appears to be gradually returning to the sector".
An element of the mortgages that appear on the books of companies increases as properties are handed over, which is usually tied to a final large payment to the developer.
However, Mr Azzam said his analysis of official records from the Dubai Land Department showed mortgages were increasing across the emirate.
Property prices declined a total of 5 per cent last year, he said, but added that pockets of stability had formed in established neighbourhoods and higher-quality buildings.
"We are expecting some more weakness in prices, but we don't expect any more massive drops," Mr Azzam said.
"Prices are already very depressed. The distressed sellers are out of the market now."
Asteco, an estate agency and property manager based in Dubai, recorded more mortgages near the end of 2010 than any time since the market collapsed at the end of 2008, said Elaine Jones, Asteco's chief executive.
"What's happened, from our perspective, is that a lot more people have become settled than before," Ms Jones said.
"A lot of people were quite afraid they were losing their jobs, and weren't buying property … We are definitely seeing an increase now."
A two-tier market had emerged, with finished properties in desirable locations at one end and unfinished or more remote buildings at the other.
Prices for homes on the Palm Jumeirah have dropped to just above 2004 prices but appeared to be bottoming out , Ms Jones said.
Banks were coming to the conclusion that the market had declined low enough to enable them to risk their cash reserves as long as loan to value ratios - the amount of the purchase price they provide in a loan - remained in the 75 per cent range.
Theoretically, that way they would only lose money if prices dropped another 25 per cent, said John Davis, the chief executive of the Middle East office of the property consultancy Colliers.
"We believe more banks are going to be coming into the market in 2011," he said. But the influx of more than 30,000 units will keep pushing prices down slowly, with some areas remaining strong because of their high desirability, Mr Davis said.
More office tenants are expected to make moves in Dubai this year as they seek to take advantage of more competitive prices.
