Luxury house prices in Dubai rise 6% in Q2

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The price of luxury homes in Dubai rose by more than six percent in the second quarter of 2013, according to the Knight Frank Prime Global Cities Index.

The index also showed that prime real estate prices in the emirate have increased by 21.6 percent over the past year, making it the second best performing market in the world.

With prices also up 11.9 percent in the last six months, only Jakarta in Indonesia has seen prices rise more in the the year to June, Knight Frank said.

"The price of luxury villas began to rise in early 2012 and apartments are now following suit," the real estate consultancy said in a report.

"The city is attracting demand fromNorth African, Asian and Middle Eastern buyers,many are cash buyers which may mitigate the impact of the prospective mortgage cap which is currently under discussion," it added.

The average price of luxury homes in 28 of the world’s key cities increased by 2.4 percent in the second quarter of 2013, a marked improvement on the 0.4 percent fall recorded in the first three months of the year.

Although Europe, with an annual fall of 0.9 percent, remains the weakest performing region it is up from -3.4 percent a year earlier.

Madrid was the weakest performing prime residential market in the last 12 months, declining by 11.9 percent, the index showed.

Last week, the International Monetary Fund warned officials in the emirate that they might need to intervene in its property market to prevent another boom-and-bust cycle of the kind which brought it close to default four years ago.

Over-inflated Dubai real estate prices crashed by more than 50 percent in 2009 and 2010, triggering a corporate debt crisis which unsettled financial markets around the world.

The economy and the property market are now recovering, but so strongly that the IMF worries another bubble could form - and because Dubai's debt has continued to rise, it might have difficulty coping with fresh instability.

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