Recent regulatory measures introduced to help sustain and regulate Dubai’s property market are already starting to take effect, with a recent cooling in the rate of growth, according to Cluttons.
The real estate consultancy said in a new report that the new regulations have positioned the market towards a more sustainable pace of growth, with reports of a new price bubble being premature.
The report also said that steps announced by the UAE's Central Bank in October to set limits on the size of mortgage loans for housing, along with the Dubai Land Department’s recent doubling of property registration fees from 2-4 percent, are already impacting the volume of deals being recorded in Dubai’s residential market.
Steve Morgan, head of Cluttons Middle East, said: "The vibrancy in the residential market has resulted in growing confidence in the real estate sector, but we believe concerns of the market overheating are still overly negative, especially given that despite the recent gains, average residential values remain well below the market peak.
"Although the long term effect remains to be seen, short term indicators show that recent regulation appears to be stemming further sharp increases in property prices. Rather than being fuelled by ‘fly-by dealers’, current demand is primarily being driven by a growing population and rising employment levels."
His comments come just days after the International Monetary Fund urged Dubai's government to be ready to act if it sees very rapid increases in asset prices.
House prices in the emirate have jumped over 20 percent in the last year, prompting the IMF to warn in July of the risk of another bubble forming after a crash of Dubai's inflated property market in 2008-2010 nearly caused state-linked companies to default.
The Cluttons report for Q3 said average capital values continued to rise by 8 percent, albeit more slowly than the record 23 percent growth experienced during Q2.
Despite the recent gains, on average, prices are still 26 percent below the Q3 2008 market peak, although they are now 47 percent above the bottom of the market, which was reached in Q2 2009. Year on year, values are 53 percent up on this time last year.
Emirates Living and Dubai Marina continue to record increased levels of deal activity during Q3, with capital value growth rates between 8.5-10 percent, ahead of the average for Dubai.
Cluttons pointed to growing numbers of buy-to-let investors from both the UAE and abroad, plus an increase in owner-occupiers, all fuelled by affordable mortgage rates of between 4-5 percent.
Cluttons added that Dubai's residential rental market is also experiencing a slower pace of growth according to the latest figures.
During Q3 average residential rental values rose by 3 percent, following on from an 8 percent increase in the previous quarter.
Morgan added: "A slowing in the rate of rental vale growth can also be expected in the residential rental market as we appear to be nearing the threshold of relative affordability. While the economy is clearly on an upward trajectory, the pace of income growth still lags behind rental value growth, so a period of more mute growth can be expected over the next few quarters."