A recovery in Dubai's battered property market, limping gradually to life after an economic slump, will be slowed but not derailed by renewed global financial woes and a European sovereign debt crisis.
House prices in the emirate's once-booming property sector are unlikely to show a clear upward trend until at least 2014 as demand for property remains muted amid growing uncertainty, analysts said. Two years ago industry watchers were expecting the bust to last until at least 2011.
Dubai, famed for extravagant projects such as the world's tallest tower and lavish hotels, had shown small signs of recovery with house prices rising in certain areas and the number of transactions rising.
The Gulf emirate has also been seen as a safe haven as the winds of change sweep the Arab world, toppling leaders in Tunisia, Egypt and Libya.
"We are not out of the woods. The crisis in Europe will add uncertainty and if anyone is planning to buy a property here they may hold off until it is over," said Majed Azzam, senior analyst, real estate and construction at AlembicHC in Dubai.
"In light of the global crisis we have pushed back our expected timeline for a turnaround."
But any severe deterioration of the global economy and the euro zone debt crisis is unlikely to have as severe an impact on Dubai's property sector as the recent global financial crisis, analysts and experts say.
During that crisis house prices plunged some 60 percent from their peaks and billions of dollars worth of projects were put on hold or cancelled.
"Property prices in Dubai have become attractive and Dubai, and the UAE as a whole, are seen as a safe haven during this regional turmoil. This is very positive for the property market here," said Giyas Gokkent, chief economist at National Bank of Abu Dhabi.
"If the euro zone debt crisis deteriorates then we could see oil prices falling sharply, which would have an effect on the property sector here, but I don't think we will see the exaggerated falls which we saw in 2008 and early 2009."
"The downside is limited provided there isn't a conflict in the immediate area."
Dubai house prices fell 8 percent in the second quarter from the same period last year, property consultancy Colliers International said in a recent report.
"If the eurozone gets worse then that could potentially put months or even years on to it [recovery]," said Saud Masud, sector head real estate at Rasmala Investment Bank.
"I think it will be 2020 when we see property prices get back to 2008 levels and that will be assuming there is five or six years of robust recovery."
Property prices soared after the emirate opened its real estate sector to foreign investors in 2002, granting them freehold ownership rights at many developments. From start-2007 to mid-2008, prices rallied almost 80 percent, Morgan Stanley estimates showed. Business was booming.
And three years ago billions of dollars worth of projects were launched at the emirate's glitzy property show Cityscape, including a 1 km-high skyscraper by one of Dubai's largest property companies, Nakheel.