Dubai's housing market is growing on the back of improving fundamentals with low off-plan sales, according to a new report by Standard Chartered.
It said the improvement in real estate prices - reportedly up by more than 30 percent for apartments over the past year - was not caused by speculators in the market.
The bank's report said this, alongside increasing real estate regulation, differentiated the price rally from the one in 2008.
Factors enabling this improvement included Dubai’s growing economy, an increasing population, and the prospect of the city hosting the World Expo 2020, said the report, adding that these limited the possibility of a new real estate bubble.
The report said in the past twelve months, residential prices in Dubai have increased by 38 percent for apartments and 24 percent for villas while rents have risen 20 percent and 17 percent respectively.
"The key difference between the real estate market in 2008 and in 2013 is off-plan sales. Flipping of off-plan properties was the main reason behind the previous boom-and-bust cycle. Authorities are deploying efforts to ensure that off-plan sales are controlled," the report said.
It added that the market has particularly benefitted from the two new property-related laws drafted by the Dubai Land Department - the Investor Protection Law and the Code of Corporate Governance for Developers.
"We expect housing-market supply to grow at the same pace as demand, with new projects being launched in a more planned and controlled manner than in the past," the report added.
“This commitment towards improving and strengthening corporate governance practices by protecting property rights has helped gain new investors and maintain existing ones. Stakeholders such as home-owners and tenants have regained confidence in the real estate sector, as reflected in the recovery of market prices,” said Standard Chartered.
Dubai’s housing market is comprised of 417,900 apartments and 62,000 villas. Residential supply has been growing at an average compound rate of around 8 percent. By the end of 2013, supply should increase by 19,400 apartments and 3,400 villas, assuming there are no delays in construction schedules.
Dubai’s property market was hit hard after the global financial crisis, with prices plummeting around 60 percent in 2009 and 2010.
Recently, the IMF has warned that the Dubai property market is again starting to display early indications of another bubble.
But Standard Chartered's report concluded: “Right now, we conclude that there are no serious indications of a speculative bubble in the housing market.”