Residential property prices in Dubai registered annual declines of 2 percent on average while rents fell by up to 5 percent, according to a new report.

Cavendish Maxwell's Q1 2018 Dubai Market Report also showed that off-plan residential properties accounted for 61 percent of the total transfers during the first quarter.

It added that approximately 3,800 units were handed over in Dubai during Q1.

Its Property Monitor Residential Survey revealed that the majority of real estate agents are predicting apartment and villa/townhouse prices as well as rents will decline by up to 5 percent in Q2.

The report said price movement in the last 12 months has varied between communities and among different buildings within the same community, thus reflecting greater differentiation in how available properties are now trading.

During Q1, residential property rents declined at a more pronounced rate than sales prices, resulting in yield compression in most communities.

"The pressure on housing allowances has also impacted rental market performance and the pool of tenants at the higher end of the spectrum continues to shrink. Rent declines will be more pronounced in areas with increasing supply and those located away from central business districts and public infrastructure," the report noted.

Regarding transactions in Q2, 42.4 percent of property agents expect an increase in new buyer enquiries, while 55.6 percent of agents expect an increase in new seller instructions.