Dubai house prices could fall as much as -70% from a fourth-quarter peak as investors are unlikely to consider re-entering the market, which faces significant oversupply by next year, according to UBS.

Billions of dollars worth of construction projects in the United Arab Emirates (UAE) have been delayed or cancelled, with Dubai particularly hard hit as the global financial crisis brought to an end a regional economic boom.

UBS said Dubai’s population was likely to fall -10% in the coming two years as a result of job cuts, with residential vacancy rates reaching as much as 30% by the end of 2010 due to an oversupply.

Average house purchase prices could fall to as much as 500 dirhams sq ft ($136.1) from a peak of 1,850 dirhams in Q4 2008, UBS said. It added that average prices had already fallen at least -25% to roughly 1,400 dirhams sq ft.

Abu Dhabi, the UAE capital and home to most of the country’s oil, has fared better, with real estate companies launching multi-billion dollar projects at a property conference this week. Mortgage default rates may pick up into the mid- to high-single-digit range in the coming quarters, UBS said. It added that Dubai had total liabilities of roughly $112bn.