Dubai: Any short-term recovery for Dubai’s real estate market needs to see Iranian investors getting back into the action. And the property market could be the first beneficiary of the full rollback of sanctions against Iran, according to a new UAE realty outlook put out by Cluttons, the consultancy.

Here’s why: In 2010, Iranian buyers made up 12 per cent of transactional volumes in Dubai property, placing them fourth behind Indians, UK citizens and Pakistani nationals. By the first quarter of 2015, Iranians’ share of buying had dropped to 3 per cent, based on official records, as the sanctions took a big chunk of their ability to commit investments outside of their own market.

“For the real estate landscape, the return of an Iranian variable to the national real estate equation will be particularly momentous,” the Cluttons report notes. “It is our view that Iranian nationals will seize the opportunity to make significant real estate investments in Dubai.”

Iranian fund flows can also prove a bulwark against another ongoing concern for the local economy and of its real estate.

“Any weakening in regional demand for Dubai residential assets as a result of continuing oil price declines is expected to be countered to an extent by Iranian funds, which are waiting in the wings,” the report notes.

The local market needs all the help it can get — all through the first-half the level of buyer support was seen shrinking.

Gains were limited to specific categories such as mid-market housing and those further down the pricing spectrum.

“[Sales] values on average declined by 3.4 per cent during the second quarter, bringing the annual rate of change down to minus 7 per cent [in Dubai],” said Faisal Durrani, head of Research. “We expect a further 5-7 per cent fall in villa values this year as supply levels rise and affordability issues challenge buyers”.

Indeed, for those with ready cash, villas in Dubai are starting to look as close to a bargain deal as possible. Units at the Springs recorded a 7 per cent value erosion in the first half of this year, thus becoming the worst-performing submarket during the period, while villas at Green Community were relatively more resilient, down 2.2 per cent.

Moreover, rising villa supply should ensure any immediate turn around on price slippage. After the 5.1 per cent fall in villa values during the first half, the average price would be in the Dh1,421-a-square-foot range.

But what the majority of prospective buyers are looking for would be a marked dip in the asking values of apartments. That, on available evidence, is yet to happen.

Upscale apartments in Dubai Marina went through a relatively slight 2.6 per cent dip, while on the Palm, mid-range apartments were down 1.9 per cent and those with a more high-end description lower by 1.7 per cent.

“Apartments continue to be viewed favourably by ‘buy-to-let’ and ‘buy-to-leave’ investors, particularly those from the region looking for a safe haven,” the report states.

Projects featuring a quite sizeable 41,000 homes-plus have been launched in the year to date. Factoring in those that were launched in the last two years, the end of 2017 could well see more than 20,000 units being added to the total. Cluttons reckons 70 per cent of these would be villas.

“The success of recent off-plan project sales, which continue to come to market approximately 10-20 per cent below prevailing rates for completed properties, underscores the affordability challenges faced by the domestic market,” the report adds.