Dubai's property sector suffered a series of blows this week after brokers confirmed a rise in distressed sales, a real estate guide downgraded its rating on residential property and an Islamic lender suspended new loans.

The once-booming real estate sector of the emirate is showing signs of collapsing due to the global credit crisis, as prices fall sharply and buyers struggle to get mortgage loans.

"There is a sizeable increase in the number of property owners in an urgent state to sell," Robert Macnair, sales director of Dubai-based Elysian Real Estate, told Reuters on Thursday.

"It could be they have a large payment coming up or they've seen the market dropping over the last month ... there is a real sense of urgency."

Property prices on Dubai's Palm Jumeirah island, a man-made peninsula developed by government-owned Nakheel, have fallen as much as 40 percent since September, real estate brokers said on Thursday.

Elysian this week sent out a text message to up to 40,000 mobile phones advertising distressed property sales offering a luxury six bedroom, six bathroom villa in Dubailand, a multi-billion-dollar luxury theme park.

The villa advertised costs 21 million UAE dirhams ($5.72 million) - half its original price - and will be completed in 2009, the text read.

Dubai downgrade

Global Property Guide cut its long-term investment rating on Dubai residential property on Wednesday from neutral to negative due to the drop in gross rental yields from last year.

"Gross yields are now an average of 5.5 percent, significantly down from an average of 7.5 percent a year ago ... At these levels, Dubai is less attractive than it was previously as an investment property," it said in a research note.

Global Property Guide said Dubai has "an enormous" amount of new supply and expects prices to fall over the next 2-3 years.

To compound matters, Dubai Islamic mortgage lender Amlak AMLK.DU said on Wednesday it suspended new loans. This follows moves by several banks to tighten lending conditions in August and September.

"It is very hard to get loans now. Customers are suffering," Rehab Gouda, senior sales agent at Al Jabal Real Estate told Reuters.

"Either they have pre-approval from before the crisis, or they are cash buyers."

Source: Reuters