Residential prices in Dubai have dropped in the first quarter of this year, according to a research note by local consultancy Phidar Advisory.

The note adds that office rents, particularly strata owned offices, have declined amid what the research says is the market undergoing fundamental shifts in its development strategy.

“Talk of a house price floor is entering the media again, yet our research indicates rent declines are accelerating and will likely continue through the summer” said Jesse Downs, Managing Director of Phidar Advisory. “This will inevitably pull sale prices down,” she added.

Rent declines continued in May, which indicates that housing may become more affordable in the coming months as prices continue to fall.

Since rents peaked in May 2014, the decline has been gradual. However, in May, the monthly rent decline contracted by 1.3 per cent. “In a down-cycle, the lowest advertised rent is particularly sensitive to market shifts and can be the harbinger of market trends. By the beginning of June, the lower limits of asked rents decreased by 4.1 per cent compared to the same week in the previous month,” says the report.

The decline in property values and rents has been a trend over the past 18 months as a number of factors continue to impact the market including new mortgage policies imposed last year as well as a strengthening dollar, which has made Dubai a more expensive place to invest.

Further to this, the development cycle in the next two years is also expected to stabalise rents and property values due to the influx of new units likely to enter the market.

In the office market the report says there is an undersupply of grade A office space, which is expected to be met by the current development cycle. In spite of this 21 per cent of office space in Dubai is vacant, according to the report.

The research note also says that the current trends in both the office and residential segments will support the drive for more affordable rents and property values, which will “support businesses and the economy in the short and medium term” concludes the report.