Real estate consultancy cautions on possibility of market overheating on back of volume of new projects
The number of new real estate launches in Dubai is a "point of concern" amid fears that the emirate could see another property price bubble, an industry expert has said.
Mat Green, head of research and consultancy UAE, CBRE Middle East, said the flurry of new project announcements could result in the market overheating.
But he added that he hoped recent regulatory measures imposed in Dubai such as a hike in transfer fees would help to "hold down speculation".
“Significant investment is again taking place in the off-plan segment, with investors enticed by the attractive payment plans, with many offering low initial deposits and back ended structures which are allowing more people to enter the market," said Green.
"The sheer volume of new project launches in the residential market is once again becoming a point of concern, although as yet the actual delivery of new supply has not reached a point where demand is being rebalanced," he added.
His comments follows a report on Sunday from the UAE central bank which warned that low residential rental yields in Dubai and Abu Dhabi might indicate growing imbalances and overheating in the real estate sector. It was the first official warning about soaring property prices.
House prices in Dubai, which nearly defaulted on its debt in 2009 after a property bubble burst, jumped 27.7 percent from a year ago in January-March, leading the global rankings for a fourth straight quarter, according to consultancy Knight Frank. In some areas, prices are back near pre-crisis levels.
Green added: "Government intervention to curb speculative buying activity is already apparent. In recent years, Dubai’s real estate sector has shown steady progress towards maturity, through a series of new regulations aimed at tightening the regulatory environment and protecting investors.
"It is hoped that these recent regulatory changes, together with the Dubai Land Department’s doubling of transfer fees on property sales, will help to hold down speculation and enable Dubai’s real estate sector to see more sustained growth in the long term.
"However, with a flurry of project announcements and renewed investment activity, the market should, quite rightly, be cautious of overheating.”
On Monday, Dubai Land Department insisted that growth in real estate demand in Dubai has been due to an improving economy, not speculation.
Director general Sultan Butti Bin Mejren said Dubai's doubling of the fee it charges on property transactions to 4 percent last year was helping to stop speculators.
Mejren did not comment directly on whether his department, which oversees the real estate market, might take fresh steps to cool demand. But his remarks indicated he was broadly satisfied with the current situation.
Last month the International Monetary Fund warned that Dubai might need stronger tools, such as higher fees or taxes, to rein in real estate speculation.