Residential property prices in Dubai fell 47 percent from the third quarter of 2008, making the emirate’s market the worst performing out of the 43 locations surveyed by UK-based property agent Knight Frank in its latest quarterly price index. However, in spite of the dramatic annual drop in property prices in Dubai, the study shows the emirate’s real estate values rose by 1.2 percent in the third quarter of 2009 compared to the previous quarter.

“Prices in Dubai have fallen the most despite the small recovery in the third quarter,” said Liam Bailey, head of residential research at Knight Frank. “The recent debt issues with Dubai World and the subsequent loss of confidence by investors means even this nascent rally is already under threat.”

The emirate’s property market was also singled out in Knight Frank’s second quarter index for being the world’s worst performing market with an annual drop of 47 percent. Dubai also saw the second biggest quarterly drop in prices, 7.5 percent.