Dubai’s real estate market has stabilised across all asset classes in the first half of this year, with the hotel and residential segments facing the biggest slowdown, according to a mid-year report published by US-based real estate firm JLL.

Rent and sale prices have been depressed by a decline in residential sale activity, as well as a significant number of units expected to be delivered in the next couple of years.

“Rents have contracted again by 2.4 per cent in the past quarter,” says Jesse Downs, managing director of local real estate firm Phidar Advisory.

The JLL report goes on to say the residential market in Dubai continues to face downward pressure as rents and sale prices register quarter-on-quarter declines. “While the general REIDIN rental index remained flat year-on-year in June, the sales index dropped 8 per cent for the same period, with declines in apartment sale prices exceeding that of villa prices,” says the report.

Residential transactions recorded by the Dubai Land Department show a 66 per cent contraction in sale values and a 69 per cent decline in the number of transactions in the first half of the year, compared with the same period in 2014. The first six months of 2015 saw a total of 7,400 deals completed compared with 23,800 in the same period last year.

The correction in the market can be attributed to the overheating of the market in early 2014, when property values were high and investor sentiments were stable. “Moving forward, the expectation is the market will continue to slow down as a strong dollar continues to affect capital inflow and foreign investor interest,” says Downs.

The office segment has also remained stable as the delivery of 162,000 square metres of space entered the market over the past quarter. These completions include eight buildings in the Dubai Design District, four buildings at Arenco Business Park in Dubai investment Park, and The One Tower in Tecom, Al-Barsha.

“There may be a need to develop low-to-mid-rise office buildings to support the needs of local businesses,” says Downs. “It is difficult to see if this trend will press ahead as it requires specialist developers that are happy to go ahead with such schemes.”