There are already signs that Dubai property market is recovering while its neighboring Abu Dhabi, UAE's capital, is still struggling.

"Dubai is close to the bottom. I don't think Abu Dhabi has reached the bottom yet," said Craig Plumb of Jones Lang LaSalle UAE.

The Dubai residential property price index (RPPI)-all residential, published by Reidin.com, rose by 7.5% in January 2012 from a year earlier. In contrast, the Abu Dhabi RPPI-all residential dropped 4.1% over the same period.

However, this conceals price movements for different property types. During the past several months, prices of villas have been rising while apartment prices continue to plunge. During the year to January 2012:

Reidin's Dubai RPPI covers seven cities, eight main districts and four major developments. On the other hand, the Abu Dhabi RPPI covers seven cities and four main districts.

Dubai's most desirable districts like Emirates Living, Downtown Dubai, Dubai Marina and Palm Jumeirah have experienced healthy house price rises in the past several months. In contrast, house prices continue to fall in less desirable areas like International City and Dubailand.

The total value of property transactions in Dubai rose by 14% to AED142.9 billion (US$38.9 billion) in 2011, according to the Dubai Land Department. Property sales in Abu Dhabi rose by 5% to AED4.3 billion (US$1.2 billion) in 2011, according to property website Bayut.com.

In Dubai, about 23,000 new housing units are expected to enter the market in 2012, according to Jones Lang LaSalle MENA. In addition, around 24,000 dwelling units are expected to be completed in Abu Dhabi in 2012, according to property consultant Asteco.

The huge increase in supply will inevitably have an impact on property prices in 2012. In addition, the regional political unrest and the Eurozone debt crisis aren't helping the UAE's housing market.

Abu Dhabi house prices are predicted to fall by about 10% in 2012, while house prices in some of the most desirable places in Dubai are expected to remain stable or rise modestly this year, according to local property analysts.

To help Dubai's housing market and boost investor confidence, the government recently announced that foreign property buyers in Dubai will be given a visa for three years instead of just six months.
Analysis of United Arab Emirates Residential Property Market »

RENTAL YIELDS Last Updated: Sep 29, 2011

UAE: Moderate rental yields, even after price falls
Prices and rents in Dubai have both declined very significantly since our last survey in September 2009 - and even then, they had fallen significantly from 2008.

Dubai has been through a storm. The country is still a long way from recovery. Prices stopped falling some time ago, but unlike in many other post-crash countries there are as yet no real signs of revival.

Prices for apartments typically range from around US$3,700 to US$4,200, except on the very largest apartments, which are somewhat less highly priced. This compares with a range of US$6,650 to US$7,300 at the peak of the boom.

Overall, gross rental yields in Dubai are moderate at around 5.6% to 6.5%.

Yields for smaller-sized apartments have moved up, but not those for larger-sized apartments.

These yields are not impossibly low. They form the base from which a recovery could begin to take place.

Read Rental Yields »

TAXES AND COSTS Last Updated: Jan 25, 2012

Tax on rental income is low in Dubai
Rental Income: There is no income tax, but that is slightly misleading, as there is a 10% tax on residential leases, assessed on the rental income.

Capital Gains: There is no capital gains taxation in Dubai.

Inheritance: The thorny issue of inheritance has caused a lot of debate. It is hoped that the position will be clearer once the new Land Law is enacted.

Residents: The Residents' visa renewal fee is AED1,360 (US$370) every three years per person.

Global Property Guide