BAHRAIN's property bubble has officially burst and is unlikely to show signs of recovery for at least two years, according to a British expert.

Prof Stephen Lee, a senior lecturer in real estate finance at City University's Cass Business School, London, says evidence shows the "inflated" sector has reached its peak and will now fall in line with prices and growth rates in the rest of the world.

"It has got to slow down at the very least, if not stop," he said on the sidelines of the first Gulf Real Estate Fundamentals Conference.

"A lot of the people buying property here are expatriates from the US and the UK (where the credit crunch has impacted the most).

"It (the credit crunch) has already hit Dubai - I have heard if you work for a property developer you will not get a loan to buy a car."

The conference chairman, who has 30 years' experience in property development, investments, property finance, sustainability and environmental issues, said the problem now facing Bahrain and the Gulf was that supply was now beginning to outstrip demand.

"Palm Island in Dubai and Bahrain Bay, for example, will be completed, but is there demand for them?" he asked.

"Next year is going to be a crunch time for this region. "You have individuals who have wealth, but they will not spend their money if there is no confidence."