Dubai residential property prices are likely to fall 10 to 20 per cent this year because of subdued demand, slower economic activity and downbeat investor sentiment, credit rating agency Standard & Poor's (S&P) said on Monday.

"Slightly lesser demand will come from non-residents," S&P said in a statement. "In early 2015, non-resident demand from Russia and other member countries of the Gulf Co-operation Council (GCC) was particularly subdued."

S&P expects oil prices to remain weak through to the end of 2016 so that economic growth in the UAE as a whole "is likely to slow markedly in 2015 and 2016".

The agency also warned that a fall in Dubai's stock index would be likely to affect investor views on property. The index is down 10 per cent over the past 12 months, according to Reuters' calculations.

That drop reflects doubts about the sustainability of current property prices, S&P said. "General investor sentiment is key in Dubai real estate because a large majority of buyers are investors."

Greater supply of new residential units will also dampen prices. S&P cited forecasts from property analysts Reidin that 20,170 new units would be delivered in 2015, nearly double the annual average of 11,600 over the preceding three years.

The real estate sector in Dubai, one of seven emirates in the UAE, has been among the most volatile globally over the past decade, swinging from boom to bust to boom again.

Prices have recovered to within about a fifth of their peak values as of January, having fallen by more than half from their 2008 highs. They have since weakened again.

Dubai's property market crash led to a debt crisis, but now property developers, many of them state-linked, are better placed to withstand market shocks, S&P said.

S&P predicted Dubai's developers, including Emaar Properties and Damac Properties, can absorb up to about a 20 per cent drop in home prices because of stronger balance sheets and greater revenue diversification into more reliable income streams.

S&P estimated property developers' debt to core earnings ratio was 1.9 on average at the end of 2014, versus 3.3 at the end of 2008.-Reuters