Property prices predicted to soar 20% in 2008

Real estate prices and rents in the Gulf Arab region were likely to rise by up to 20% in 2008, due to higher labour and construction costs and delivery delays, an executive at Jones Lang LaSalle said on Wednesday.

"We are anticipating that property and rent prices across the Gulf Arab region will continue to escalate in value by between 10 and 20%," Blair Hagkull, regional managing director at Jones Lang LaSalle told a news conference in Dubai.

"With the delays in delivery, the spectre of huge supply continues to be delayed and you see greater demand... there will also be an increase in labour and construction costs and land prices."

Property prices have soared in Gulf Arab countries due to surging demand for housing and office space spurred by economic growth and windfall revenues from a five-fold increase in oil prices since 2002.

Rents and utility costs in Qatar surged 28.8% in third quarter, triggering a 13.73% annual inflation at the end of September.

Bahrain has come under mounting pressure to tackle inflation caused by rising food and property prices. While Dubai, the Gulf commercial hub, has already set an annual rent cap of 5% for 2008, tighter than last year's 7% cap and the 15% ceiling of 2006.

Jones Lang LaSalle expects a supply surplus in Dubai between 2010 and 2012, Hagkull said. This adjusts the global real estate investor's previous forecast that supply would exceed demand between 2007 and 2009.

LaSalle last year advised clients in North Africa and the Middle East on more than $150 billion worth of real estate.

Of 57,000 residential units expected in Dubai last year, less than 20% have been delivered by September, Cairo-based investment bank EFG-Hermes said in a report that month. It said then it expected a rise of 5-10% in property prices in 2008.

Earlier this month a newspaper reported that Dubai plans to introduce a new index setting a range of appropriate rents for properties across the city to control soaring rental prices that are fuelling inflation.

Dubai does not have a property index, which means that tenants often pay very different rates for the same types of properties as rents for new arrivals have risen rapidly in recent years. (Reuters)