Dubai property prices show 76% increase

Rampant inflation and a booming economy saw house prices in Dubai rocket by 76 percent in the year to June, a new report from real estate broker Colliers International showed on Wednesday.

While recording massive annual increase in property values, Colliers’ eagerly anticipated House Price Index for Dubai claimed house price growth slowed from 42 percent in first quarter of 2008 to 16 percent in the second quarter of the year, fuelling fears the market is heading for a slowdown.

Ian Albert, Colliers regional director said: “If you consider the performance of other global cities over the same period, Dubai offered attractive returns comparative to these markets.”

However Albert warned house price inflation would slow further.

“Looking forward to future quarters we expect a return to fundamentals as the demand-supply dynamic moves towards equilibrium,” he added.

Dubai has benefited from a six-year real estate boom triggered by the introduction of foreign ownership rights while an influx of expatriates has driven prices higher as developers have struggled to keep pace with demand for top-end apartments and villas.

Unlike Abu Dhabi, Dubai’s oil reserves are small, so the emirate has been forced to broaden its economy by developing tourism and building massive real estate projects like the offshore Palm island trilogy and the vast theme park Dubailand.

Increasing construction costs, rising inflation, rental growth and the weakening of the UAE currency, have all contributed to spiraling property values in Dubai, the report said.

Projects at or near handover saw a pronounced spike in prices, Colliers noted, with competitive interest rates and increased mortgage availability, also driving house price inflation.

In the year ending June, the cost of apartments grew by 83 percent, villas by 73 percent and townhouses by 38 percent.

The price of property under construction in the second quarter of 2008 stood at $519 per sq ft, with the cost of a completed home cheaper at $485 per sq ft.