DUBAI: Dubai's property market is likely to face further price falls and increased concerns over the availability of finance after the emirate said it would delay debt payment issued by two of its flagship firms, analysts said.

Dubai rocked the financial world when it said it would ask creditors of Dubai World and Nakheel to agree to a standstill on billions of dollars of debt as a first step to restructuring.

"The news plays on investor psyche and house prices may slide a further 20-30 per cent earlier than our existing view of second half of 2011," said Saud Masud, UBS' head of research and senior real estate analyst, Middle East and North Africa.

"There may likely be further job cuts as a result of any potential restructuring, and that could directly impact population outflows and result in housing oversupply."

State-run Dubai World had $59 billion of liabilities as of August, a large proportion of Dubai's total debt of $80bn and repayment of Nakheel's $3.5bn worth of Islamic bonds, which were originally due to mature on December 14, was widely expected by the market to be met.

"I think residentially there will be an impact. There will be uncertainty over liabilities for that group going forward and that will impact pricing," said Nicolas Maclean, managing director at real estate services firm CB Richard Ellis.

"But if you hold property in an unrelated developer, there may be only be a knock-on effect short-term," he added.

A number of reports published by analysts recently have suggested that conditions in Dubai's real estate, where prices have fallen some 50pc since their peaks last year, were improving.

Colliers International said in a report house prices rose 7pc in the third quarter, posting their first rise in a year.

"The real concern is what further provisions banks will have to make and their ability to put liquidity into the market in 2010, in terms of mortgages and development projects," the firm's regional director Ian Albert said.