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Dubai: While 2009 is a year of real estate correction, market stability will come in 2010 before rentals and property prices start recovering in 2011, a report shows.

As late as last October, more and more developers were launching increasingly ambitious projects. Even master developer Nakheel joined the competition by launching their kilometre-tall tower.

Most of these plans have either been cancelled or severely delayed after liquidity and end-user demand dried up quickly.

Banks in Dubai have put the brakes on lending and with a lack of mortgage and home financing options, many people are being priced out of the market.

Those who own property and are trying to leave are not putting prices down sufficiently so people can buy. "There is nothing surprising that access to real estate financing is important for the market to gain some traction. A clear indicate of the market is transactions and there really has been a change in activities from a transactional-led market to a wait and see market," Blair Hagkull, managing director of Jones Lang LaSalle Mena (Middle East and North Africa) region, said.

Many investors in off-plan properties have become cautious about the state of Dubai's real estate market and are now trying to get out of their contracts. Many signed contracts assuming that they would get financing to help pay the outstanding lump sum for their unit. However, while this is unlikely in the imminent future, Hagkull said now is not the time for cancellations.

"The key thing is communication. Very clearly, we've seen opportunities to reschedule loans, consolidate and push the horizon back to make things more affordable. It is in no one's best interests, for developers or investors, to fail," Hagkull added.

The report also notes that Dubai has two advantages over other markets in the Mena region, giving it a quicker recovery time.

These advantages include Dubai being the most global market in the Mena region and has experienced astronomical growth.

"What is important is that people must realise that what has happened is a good thing, and not a bad thing, with the smaller, unqualified inexperienced developers being forced out of the market," said Abdullah Al Harbi, chief executive of Eye of Dubai.

The report also notes that smart developers are likely to do well during this slowdown as construction costs have dropped about 40 per cent since October 2008.

Source: Copyright © 2009 Gulfnews.com. All rights reserved.