Dubai real estate prices could fall as much as 60 per cent in 2009 from their peaks in July last year, while Abu Dhabi may slide as much as 20 per cent, Shuaa Capital said on Sunday.

Real estate prices have fallen by around 40 per cent in Dubai and by around 15 per cent in Abu Dhabi from their peaks last year,  Roy Cherry, vice president, research at the Dubai-based investment bank told reporters on Sunday, adding that rents in Dubai are likely to fall some 20 per cent in the next two years.

'Dubai is seeing a negative growth in demand for real estate,' Cherry said.

'At the same time it is seeing an increased output. We think the net result of that is lower occupancy rates, going down to the 80 per cent level which will mean a correction in the rents,' he noted.

Dubai's population was likely to fall 5 per cent in 2009 on job losses, while the population of the United Arab Emirates would ease 1 to 1.3 percent, Shuaa said.

Rental rates for apartments and villas have been levelling off throughout 2008, with an average growth rate of 4 percent and 8 percent respectively, property services firm Asteco said in a report last week.

Rents are expected to continue rising in Abu Dhabi, albeit at a slower pace, due to strong demand exceeding limited supply, Cherry said.

Around 30,000 units are expected to be delivered in Abu Dhabi in 2009 and 2010 compared with 80,000 units, he said.

Rents in the seaside emirate have been spiralling since a regional real estate boom started in 2002 when it first allowed foreign investment in property.

Falling oil prices and fallout from the global credit crunch have since taken their toll on Dubai's once-booming real estate sector, which has shown signs of slowing in recent months.-Reuters