Based on transaction data from the first six weeks of Q3, the report also said that nominal prices for single-family homes declined four percent and apartments declined 0.6 percent.
"This has led to yield compression but the report also states that as many as 30,000 additional units are needed through 2018 to maintain rent stability," the report said, adding that the figure is based on Phidar’s monitoring of announced, launched, stalled and ongoing projects.
Phidar said its House Price Index reflects real prices adjusted in representative projects across Dubai that have been completed since 2009.
Its report said residential development opportunities are still ample in Dubai, but added that the market would benefit "exponentially" from developer specialisation, particularly in the most under-supplied assets.
It said middle-income housing could be a tangible and powerful catalyst, with Phidar research indicating that another 15,000 units could be reactivated from stalled projects.
Phidar said that in the short term, Dubai's property sector is likely to display volatility which could lead to a price correction, following a two-year period of "exuberant investor sentiment".
The report also suggests that long term capital appreciation due to strong demographics is a foreseeable scenario but the current supply trends and affordability constraints will pose challenges to sustained long term growth.
Last month, Knight Frank said in a report that annual growth in prime property prices in Dubai almost halved in the second quarter of 2014 compared to the previous quarter.
Prime prices rose by 6.3 percent in the year to June, down from 11.7 percent in the last quarter, it's Prime Global Cities Index for Q2 showed.
Dubai was ranked the 13th best performing real estate market tracked by the property consultancy, a sharp fall from previous quarters when the emirate has featured in the top two positions.
Knight Frank said moves to introduce a mortgage cap and double transfer fees at the end of 2013 has "influenced buyer activity more than forecast".
Phidar Advisory is a recently established advisory firm specialising in real estate in the UAE and led by Jesse Downs, a former senior executive at Jones Lang LaSalle.