DUBAI FAMOUSLY used to boast the highest concentration of construction cranes in the world – and quite a few Irish investors.

Now, its property sector has investors fighting for the return of down payments on buildings that might never be built and state-linked developers continuing to fall behind on contracting invoices despite having received billions of dollars in bailout money.

Firesales saw drastic reductions at previously desirable locations such as the Palm Jumeirah, Dubai’s first completed man-made island development, and at the Old Town district surrounding Burj Dubai, the world’s tallest tower that is planned to open later this year.

Colliers International’s house price index survey indicates that prices have almost halved since their peak last year, but the pace of deceleration is slowing from 41 per cent in the first quarter down to 9 per cent in the second quarter of this year.

Ian Albert, regional director, says the real estate market should reach its bottom in the last quarter of this year.

He adds that some encouraging signs have emerged, including a 50 per cent rise in the volume of transactions.

Developers are trimming down their project portfolios, but the market will still have to accept a surge in supply over the next couple of years, leaving the sector reliant on global economic recovery to lift Dubai’s outward-looking economy up again.

Matthew Green, CB Richard Ellis’s head of research for the United Arab Emirate, says the overhang of new apartments and villas – as much as 20,000 new units this year – will keep pressure on the property market.

“Lower rents should encourage the return of the expatriate labour force, but we aren’t seeing that yet,” he says.

“Let’s hope that can come in 2010, but such is the supply that we have to look for stability before a return to growth.”