On the contrary: Dubai property slump due to tighter rules, not oil plunge

The firmer grip on real estate in Dubai has the whole sector moving to a screeching halt according to experts. Preventing a housing bubble is a priority among policymakers and it is causing a slowdown in the emirate's real estate sector rather than dropping oil prices. However, it’s still a contributor.

Dubai, compared to other emirates, has a low reliance on oil despite providing three-quarters of the nation’s consolidated revenue in 2014, according to credit agency Moody's.

"Dubai residential property sales have declined over the past three quarters, but the drop in oil prices is coincidental and the slowdown is more due to big price increases in 2013 - the market is adjusting to return to affordable levels," said Nicholas Maclean, managing director of consultants CBRE Middle East.

"This is a positive trend and will help prevent a bigger correction in the future."

While housing prices are expected to loosen up this year, some experts said that well-balanced supply and demand for properties should keep prices stable.

Last year, Dubai doubled property registration fees and the UAE federal government raised the minimum mortgage deposits, dampening demand.

"The government was right to act to curb speculation. It's just that these measures have now coincided with a weakening global economy," said Faisal Durrani, head of research at property consultants Cluttons .

The impact of the new rules on house sales has been acute, said Durrani, predicting further declines in prices in the second half of 2015.

They forecast about 20,000 new residential units will be completed and handed over from now until 2017, while Dubai's population is expected to increase by 400,000 over the same period from 2.4 million at present. About 41,000 units have been announced this year.

"Unit delivery and population expansion seem well matched, which indicates the residential market should be pretty stable," added Durrani.

But prolonging the oil plunge can lead to serious consequences on UAE real estate. The government, being the main real estate facilitator through infrastructure spending, is still heavily reliant on petroleum-based income.

"Oil is likely at unsustainably low prices - we should see a rebound, which will substantially increase government revenues in the medium term, but the question is when will that rebound happen" CBRE's Maclean said.