Rents will fall further in the capital this year as yet more property comes on to an oversupplied market, according to the consultancy CB Richard Ellis (CBRE).
"Amidst a more positive economic outlook, downside risks still persist with the imminent delivery of a significant volume of new development covering both the residential and commercial sectors," the company said.
"With supply forecast to outstrip demand over the next 12 months, a further drop in rental rates is inevitable."
Average residential rents on the Abu Dhabi mainland fell 30 per cent in the fourth quarter from a year earlier and 5 per cent from the previous quarter, the company said.
In Dubai, home values have slumped up to 60 per cent since 2008.
More GCC nationals are investing in property across the UAE, however, replacing investors from Europe and the US, CBRE says.
With the Emirates remaining stable at a time of uncertainty in many countries in the region, the country - and Dubai in particular - is regarded as a strong prospect for regional investment, according to the property consultancy Cluttons.
The consultancy says it "has seen an upward trend of local buyers looking to invest in a property market, which many analysts believe is at the bottom. Speculation has disappeared and distressed sellers are very few.
"[We] are now seeing more GCC nationals investing in the UAE, and seemingly these buyers are replacing investors from Europe or USA."
Improved lending conditions are also helping to drive investment.
Since the downturn of 2008, the company said there had been a return to property financing by the banks. At that time, nearly 70 per cent of lenders had withdrawn from this type of finance. Now 95 per cent of those lenders had returned to the market.
Property mortgage loans totalled Dh28.2 million (US$7.6m) in December 2006, Cluttons said. But by last September, loans had reached Dh160.1m, which the property firm believes is the result of more people applying to buy rather than rent homes.
"Dubai has definitely learnt lessons from the past, and as such more and more transparent legislation is being passed at government or federal level, which can only improve the prospects of buyers and sellers alike," said Mario Volpi, the head of sales and leasing for Cluttons Dubai. "It is still a buyer's market, since the global recession. However, now with the return of accessible financing, sellers are now enjoying a high number of buyers in the market, therefore experiencing quicker sales."
But the Dubai market is still suffering from oversupply, leading to improvements in demand in selective areas of the emirate, Cluttons added.
This view has also been voiced by Jones Lang LaSalle, which said rents and prices in Dubai were likely to "increase in some locations, remain stable in others and fall in others in 2012".
"Overall differential between good and bad will widen," Jones Lang LaSalle said in a report. "Pricing will be driven by increasingly selective tenants and investors who require residential buildings that benefit from high-quality projects benefiting from completed infrastructure, transport links, building management, service charges, along with surrounding community facilities and amenities."
Jones Lang LaSalle also noted this week that Middle Eastern investors were increasingly buying in the central London residential market. Last year, the company sold about $2 billion of new-build residential property in London to foreign buyers, with regional investors accounting for about 9 per cent of the sales, up from 5 per cent in 2010.
"The Middle East now accounts for the second-largest group of foreign investors into the London residential market after nationals from the Asia-Pacific region, who accounted for 15 per cent of overall sales," Jones Lang LaSalle said.