Dubai: The UAE’s real estate sector is in for another difficult year according to the credit rating agency S&P, a sentiment which goes counter to the majority view among real estate consultancies that market sentiments are improving.

S&P builds its case around the fact residential prices and rents in Dubai will decline by “another 5-10 per cent” this year. And this could be brought on by the additional supply of new homes scheduled for the year, with Emaar and Damac likely to deliver around 5,000 units.

“Assuming the remaining competitors deliver a slightly lower volume, the market may absorb a residential supply of at least 10,000-11,000 units in 2017, which is more or less in line with the long-term average,” said the S&P report. “We therefore do not expect this steady supply to act as a catalyst to currency effects, but could potentially add further downward pressure on residential prices.”

Last year, 15,000 homes were handed over.

“With the fallout from low oil prices, a weak pound sterling, and the rising cost of tourism, it is no surprise that 2016 was a tough year for the real estate market,” S&P notes. “Dubai's residential prices dropped by 8-11 per cent on average and rent fell by 6 per cent, with most areas of the city affected. The struggle is set to continue into 2017 as currency pressures persist and residential prices and rents are likely to continue to fall.”