Well known real estate company Cluttons international has taken the bold stance of predicting a recovery in the Dubai property market in 2012, which they said will enjoy a "brisk start".

So confident is Cluttons that activity will be brisk in Dubai this coming January, the firm has employed ten new staff members.

This is a particularly bold stance coming now as the Eurozone crisis seems to worsen by the day, and we begin to see, for the first time talk of it actually collapsing. This is still thought to be impossible according to most analysts, but some articles going for the shock and awe approach have hinted that banks may be starting to think about what if scenarios for this.

According to Cluttons, Dubai ends this year with more positivity than has been seen for the previous three years. The firm says that the high end residential sector has benefited from the capital shifts caused by the Arab Spring, while commercial occupiers are seeing the benefits of the savings they can make in Dubai's tenants' (buyers;) market. It says that where prices are still falling they are falling slower.

If you look at it pragmatically, most markets now face downside risks from the continued violence in the region owing to the Arab Spring, the Eurozone debt crisis and continued weak global performance. Dubai doesn't really have anything to lose, but everything to gain, and it is a market with all the attributes of the Middle East, but none of the Arab Spring troubles.

According to Cluttons Dubai is also a much more mature market now, with buyers buying based on specification, finish, location, amenities and a sense of community rather than the speculation seen at the height of the boom. Likewise tenants are also being more flexible; willing to accept less rent and a good tenant, than a large void or bad tenant to maintain higher rates.

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The residential property market in Dubai has remained quiet for the second consecutive quarter. Worse, experts are warning that the sector may face a further slowdown due to the eurozone crisis and weak economic outlook in the US.

The latest report from CBRE shows 1,459 residential transactions for the third quarter of the year, compared to 2,649 transactions during the third quarter of 2010.

Although outlook for the global economy may be slightly uncertain, the International Monetary Fund recently revised economic growth figures for the United Arab Emirates upwards to 3.8% for this year, compared to 3.3% earlier on in 2011 and it feels the Emirates is continuing to stage a modest recovery.

This is good news, but the latest HSBC report is slightly conflicting as it suggests private sector activity is beginning to slow. However it also points out this will have little effect on economic expansion for this year. Also, that the opening of the new Metro Green Line two months ago could have the effect of stabilising rents and increasing occupancy rates in some of the most densely populated areas in the emirate.

Lease rates for villas and apartments have only declined slightly during the last quarter, dropping 1% compared to the previous quarter, but the year-on-year fall is about 19%.

Villas are proving to be more popular than apartments as supply remains limited and demand remains high, especially for luxury properties. Even so lease rates have dropped by around 10% year-on-year, but this is half the rate of decline seen for apartments during the same period.

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Emirates based Emaar Properties, the developer responsible for the world’s tallest building, is currently in talks with several emirates for plans to develop affordable housing schemes. Initial plans are centred on Dubai.

The chairman of Emaar thinks the market could benefit from more affordable housing, which, priced at around $136,000, would be accessible to those on relatively low incomes. Emaar announced its intention to concentrate on affordable housing last month, as the region has a chronic shortage of affordable homes.

The developer has already launched a division to build affordable property across North Africa and the Middle East, and it could prove to be very lucrative.

Although affordable homes are needed in Egypt, Kuwait and Saudi Arabia, and across the whole of the UAE, the concept does vary according to the country.  In the wealthy Gulf States low income is higher than in poorer states such as Egypt.

Jones Lang LaSalle estimated that the Middle East and North Africa have an affordable housing shortage of 3.5 million homes, with nearly half of these being in Egypt. The second highest shortfall is in Iraq, followed by Morocco.

In spite of being the wealthiest Gulf state, Saudi Arabia has the greatest need for middle income housing, and has already pledged to spend $130 billion on social projects including new homes and jobs.

Egypt and Bahrain are also anxious to reduce the shortfall, especially in the wake of the Arab Spring which saw many citizens protesting about the lack of homes.

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Abu Dhabi developer, Sorouh Real Estate is currently working on a plan for more homes for middle income families. In July last year the Abu Dhabi Urban Planning Council announced that all major residential property developments in the capital would have to have rental options for middle income families, which would be set at around 35% of total annual household income. Last November Sorouh said it was looking at options on how to meet with this requirement issued by the UPC.

Affordability is still a problem in Abu Dhabi, and even though a recent report by CB Richard Ellis found rents had lowered, it also found many developments were still targeting luxury markets. Lower-priced accommodation still tends to be in areas devoid of facilities and amenities, and public transport links are often poor.

This lack of facilities often deters people from living outside central areas, and needs to be taken into account when planning affordable housing.

In spite of the UPC planning guidelines, under which at least 20% of new residential property is supposed to be set aside for middle income earners, only a few affordable housing projects have been announced. Apparently most developers feel it is unrealistic to provide housing at the rentals stipulated by the UPC, as they say they'll be unable to generate sufficient profit.

Residential rents in the capital have fallen by 7% during the third quarter compared to the second quarter, with older units performing the worst. However prices of residential property have remained stable despite demand having remained weak.

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Yet another report thinks that the Dubai property market could be on the verge of a recovery. In the second quarter villas in prime locations increased in value by 1%, and rents by 0.7% compared to Q1, according to a report by Cluttons. Their report found that property in desirable areas has held its value or increased slightly, even though the early part of the year had been marred by uncertainty in the region.

However their report does caution that price rises and increases in rent have not been reflected across all sectors, as apartments are still seeing price instability due to continuing oversupply. This will worsen as a further 10,000 to 15,000 new units are expected to be completed by the end of 2011. Apartment rents decreased by 2.5% compared to the second quarter in the majority of locations.

This is the second recent report to say that property prices may have finally bottomed out in the emirate, as Jones Lang LaSalle has already commented that villa prices have increased by 59%, even though volume has fallen by almost a third. This, they said shows that prime property is proving to be most attractive to buyers.

According to property experts, those projects that are most attractive to buyers are in areas with finished infrastructure and community facilities, and these are most likely to realise the benefits from increased activity in the market.

Prices in the emirate have dropped by around 60% since the beginning of the global crisis, and many projects have been put on hold or cancelled. Some developers are struggling to repay bank loans and contractors are now focusing their attention on providing property which actually meets customer's needs.

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The rate of decline for rental prices and sales in Dubai slowed during the second quarter of 2011. This is potentially one of the first signs that the market is stabilising, although the Abu Dhabi property market is still continuing to decline due to oversupply.

Villa rents remained relatively stable, as they have been for the last 6 months previous to the second quarter. Apartment rents fell by an average of 2%, and declined by a similar amount during the first quarter of the year. That is with the exception of downtown Dubai where apartment rents fell 8% quarter on quarter due to new supply.

Property prices declined by 3% in the second quarter. This followed stability on villa prices in established areas in Q1, when larger or new villas dropped their price by around 3% to 5%.

The picture in Abu Dhabi isn't nearly as good. Apartment rents declined by around 8% during the second quarter, having already fallen by the same amount during the first quarter, and by 7% during the fourth quarter of 2010. Villa rents fared a little better, especially for those properties which were ready to move into.

Earlier on in the year, property prices in the UAE had been predicted to drop by another 25% to 30% due to lack of population growth and new properties coming on to the market.

It was estimated that there would be another 54,000 homes coming onto the market in Dubai between now and 2015, while Abu Dhabi could expect another 50,000 homes by 2014. It now looks as if this figure may have been overestimated, as some experts think that Dubai will not receive any more than 10,000 new units this year, which includes residential and commercial property.

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Not too long after upsetting and embarrassing the President with the first downgrade of the US debt rating in America's history Standard and Poor won't be winning any friends in the gulf property market either. According to the ratings agency property prices and rents will continue to fall in the region throughout the second half of this year.

In a new outlook report on the gulf region, S&P said that they expect to see developers continuing to scale back their activities and concentrating more on rental and management of existing stocks, especially in markets that are oversupplied such as the UAE.

It also expects to see a similar sea-change as was witnessed in India 2 years ago, with developers increasingly turning their back on high-end residential developments to focus on housing and urban regeneration, particularly in Saudi Arabia.

S&P credit analyst Tommy Trask said in the report: "Despite property price falls of up to 60 percent in some markets – in the UAE, Qatar, and Bahrain for example – between late 2008 and 2010, we expect capital values and rents to continue their largely downward slide in 2011."

Trask also highlighted risk factors such as affordability, supply-demand imbalances and lack of mortgage financing which are all impacting on the decisions of real estate companies in the region.

"In our view, much work also remains to be done in shaping legal and regulatory frameworks for real estate activity in the region," Trask said.

Trask also predicted particular sluggishness in markets that were directly affected by the protests of the Arab Spring, naming Bahrain and Egypt.

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