Dubai was one of the top five best performing real estate markets in the world last year, according to a the latest report from international consultants Knight Frank.
According to the latest Knight Frank Prime Global Cities Index, the emirate ranked 4th on the list of 29 global cities studied. Prices rose 18.3 percent in the twelve months between March 2012 and March 2013, with prices up 5.4 percent in the last three months, it claimed.
Dubai was the only Middle East city on the list and ranked higher than traditionally popular real estate markets like Monaco, London, Hong Kong and Moscow.
“A typical prime property is now worth 21.3 percent more than it was in Q2 2009 when Knight Frank’s Prime Global Cities Index hit its post-Lehman low,” said Kate Everett-Allen, International Residential Research at Knight Frank.
However, the overview showed a marked difference in performance across the globe. Cities in Asia, North America and the Middle East continue to dominate the top half of the results table while seven of the bottom ten rankings are occupied by European cities.
Dubai was one of the hardest hit markets during the financial downturn, with prices dipping up to 60 percent from their peak in 2008, but local analysts have warned that the city’s resurgent housing market needs to be monitored more carefully as residents start to feel the effects of a rising cost of living.
In its latest report, property consultants 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.