DUBAI: House prices in Dubai, which has been hammered by a property downturn in the wake of the credit crunch, rose for the first time in a year in the third quarter, Colliers International said yesterday.

The Gulf emirate, home to the world’s tallest building and man-made islands shaped like palms, saw the bottom drop out of its real estate market as financing dried up, construction ground to a halt and projects were delayed or cancelled.

Colliers said house prices rose 7 percent in the third quarter over the prior quarter, the first pick up since the third quarter in 2008. The firm pinned the rise on increased mortgage availability and more confidence about expatriate job security.

“The Q3 results indicate a ‘bounce’ in the market but we will have to wait for the Q4 results before we can say whether an underlying growth profile exists, indicating a potential recovery,” Ian Albert, Colliers regional director, said in a statement.

Prices for apartments, villas and townhouses all showed a modest increase in the quarter from the second quarter while the number of deals also rose.

Market transactions in the third quarter rose 64 percent over the second quarter, with apartments accounting for the majority of deals.

The improving conditions in Dubai’s once-booming real estate sector are in line with a nascent recovery in more mature global property markets such as Britain and the United States.

“It may be too early to figure out if this is the beginning of a postive trend,” said Sana Kapadia, real estate analyst at EFG-Hermes.

Kapadia said the increase in transaction volumes and buyers’ emphasis on completed properties — rather than the off-plan projects whose completion may be in doubt — was an encouraging sign.

“There is still a big question of supply, of how demand is shaping up and the level of job creation,” she added. “Banks will say there is some lending but it has been quite selective.

“The mortgage market still needs to gain some traction.”

A Reuters poll in October indicated the view that prices will fall a further 10 percent in 2009.

Colliers said yesterday that, year-on-year, prices fell 47 percent in the third quarter.

Houses prices had fallen 9 percent in the second quarter but the pace of decline had slowed. The boost in the third quarter puts prices back at levels last seen in the second quarter of 2007, Colliers said.