DUBAI — A three-year downturn in Dubai's property market will likely continue until at least 2020, Standard & Poor's said Tuesday, citing low oil prices, the introduction of VAT and a Gulf diplomatic crisis.

A glut of housing units and weak demand were also key reasons for the decline, the credit ratings agency said in a report.

The emirate's real estate sector has been on the slide since 2014, when crude oil prices crashed, dealing a harsh blow to many Gulf investors.

Home prices dropped more than 15 percent between then and mid-2017.The downward trajectory continued through to the end of last year, the S&P report said, with prices of residential units falling a further five to ten percent.

It said the introduction of a value added tax and a prolonged crisis between Qatar and its Gulf neighbors, including the United Arab Emirates, had also put pressure on real estate prices.

S&P called the downturn a "correction" but said the sector may start to bounce back when Dubai hosts a six-month World's Fair in 2020.

"We believe this correction will continue at least for this year and next, before prices stabilize in 2020 at the earliest," it said, adding that rents will likely follow the same trend.

Dubai's Expo 2020 is expected to attract up to 300,000 visitors a day when it opens in October 2020.

Experts have predicted it will also create around 300,000 new jobs and attract new residents in the emirate city, which currently has a population of three million.

Dubai is slated to spend some $7 billion (5.7 billion euros) on infrastructure projects and $2.9 billion on the expansion of the metro route to the exhibition between now and event's inauguration.

The property sector and related activities form around 13 percent of Dubai's gross domestic product, which was $108 billion at the end of 2017.

Between December 2015 and June 2017, overseas investors put up as much as $41 billion to purchase property in the emirate, said the Dubai Land Department in August.

The oil-price recovery will most likely be short-lived, so we don't see the recent surge as particularly supportive. Brent has been trading above $60/bbl since Oct. 27, 2017, and even touched $70/bbl in January 2018.

S&P Global Ratings has raised its average price assumptions both for Brent and West Texas Intermediate (WTI) crude oil for 2018

by $5 a barrel (/bbl) to $60/bbl and $55/bbl, respectively. We believe the price increases reflect ongoing OPEC production cuts, supply

disruptions, and temporary production declines, as well as positive market sentiment about demand. We expect the

Brent oil price to fall to $55 from 2019 and thereafter. The sustainability of these prices depends on, among other

things, OPEC's ability to balance oil supply and members' willingness to adhere to output restrictions beyond March

2018; U.S. shale oil production growth and its decreasing break-even price; and growth and innovation in renewable

technologies. Futures prices currently remain above $60/bbl until February 2020 and are declining thereafter, meaning

that it is more expensive to buy oil for immediate delivery than for future delivery. While the current recovery in oil

prices could be a short-term event, we note that it also remains well below 2012-2014, when Brent was trading at more

than $100/bbl and real estate prices were rising at about 10% annually.

Moreover, Dubai's economy today does not depend on oil as much as it used to. Dubai's oil revenues represent only

6% of the total expected government revenues for fiscal 2018, showing how successful Dubai has been in diversifying

away from oil. Indirectly, though, the effects of lower oil prices could include diminishing purchasing power, weakened

investor sentiment leading to reduced interest the region, and slowing business activities of non-oil companies. — AFP/SG