Real estate prices in UAE capital Abu Dhabi are also down an average of 20% since a peak last summer as the UAE's property sector is dealt a 'worse than expected' blow by the global financial crisis, Morgan Stanley said in a research note.
'Anecdotal evidence suggests sharp falls in transaction volumes in the fourth quarter due to deteriorating economic conditions, the disappearance of speculative buying and the lack of financing,' the bank said in the 30 January note.
Since September, Dubai apartment prices have fallen 25% and villa prices are off 26%, 'belying the argument of some developers about the prices resilience of villas and low-rise building segments', Morgan Stanley said.
Prices of high-end Dubai properties -- including those at the Burj Dubai development that includes the world's tallest tower, as well as the man-made Palm Jumeirah -- are down 35% since their peak, the bank said.
Dubai's building boom has unraveled since the autumn amid a worsening global financial crisis that has led to scores of job losses and project delays. Some US$263 billion worth of projects in the UAE have been delayed or cancelled, Morgan Stanley said, citing data of Middle East business information website Zawya.
Emaar Properties is likely to be the 'worst affected' among Dubai developers by the change in selling prices, Morgan Stanley said.
'We believe that Emaar runs a high risk of sales returns and defaults among its recent launches,' it said. 'The company's high-end developments, the Burj area and The Old Town, have taken the biggest hit since the peak.'
Analysts surveyed by Reuters in December said they expected Emaar's fourth-quarter profit to fall 7.5%. The stock has fallen about 17% this year.
Morgan Stanley said real estate units at Aldar Properties' Raha Beach development had suffered a near 30% downturn in prices since hitting a peak last summer.
Rents in Dubai, meanwhile, were down 7% in December from a peak last summer, while the cost of renting villas had declined 10%, the bank added.
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