Dubai’s resurgent housing market needs to be monitored more carefully as residents start to feel the effects of a rising cost of living, a property consultant warned on Thursday.
In its latest report, CBRE argued that if new supply and further regulations are not added to the market, Dubai’s “competitiveness as a burgeoning global business environment” could be affected.
The firm also warned that the return to the market of speculator activity, and the consequent rise in prices, could be “a little ahead of reality”.
“The residential sector has maintained positive momentum amidst solid market fundamentals and steady economic growth,” the company said in its latest research note. “However, there is a modicum of concern that the recent escalation of sales and leasing rates could actually be a little ahead of reality."
CBRE pointed out that while sales volumes had grown by 30 percent in the first quarter year-on-year, figures had actually dropped since the last quarter of 2012.
Transactions dropped by 24 percent quarter-on-quarter, while the overall value of properties sold fell by 17 percent.
The firm said that 60 percent of all sales had taken place in well-established locations, such as the Marina, Emirates Hills, the Palm Jumeirah and Downtown Dubai. Rents of two-bedroom units in these locations rose by 27 percent year-on-year.
The highest rise was seen in the Greens, where rents rose by 40 percent in the last twelve months.
Average villa prices rose by almost 5 percent in the first quarter, with smaller villas registering much higher growth.
In the office market, which has been oversupplied ever since the financial crisis rocked Dubai in 2009, CBRE reported “growing demand” for commercial space. It said that prime rents in the CBD had risen by 4 percent on quarter-on-quarter, while there was evidence of rental growth for selected areas in Jumeirah Lakes Towers, Business Bay and TECOM.
Dubai has seen a slew of new megaprojects announced in recent months, including the giant Mohammed Bin Rashid (MBR) City, a mixed-use development located in Dubailand. It will include the world's biggest shopping mall, more than 100 hotels, a Universal Studios franchise and a public park larger than Hyde Park.