Central bank says further rapid increases in property prices could signal overheating in the market
Qatar's real estate prices hit record highs in June, according to the Real Estate Price Index published by the Qatar Central Bank.
Average prices for land, commercial and residential properties in June stood 20 percent above their previous peak in September 2008, the central bank said.
It added that despite fears that the price hike could suggest a potential overheating of the real estate sector, the increase is still within the fundamentals of Qatar's fast growing economy and rapid population growth.
However, the central bank added that current price levels were close to the limit of the fundamentals.
According to the latest data, the REPI increased 21.5 percent in the first six months of 2014, showing a significant acceleration compared with the 6.2 percent increase in the second half of 2013.
The index was developed to measure the average increase in real estate prices in Qatar. It is based on Ministry of Justice data on land and property transactions published on a weekly basis.
The index said real estate prices in Qatar have recently been pushed up by both a base effect (population) and an income effect (income per capita).
"As per capita GDP rises, more income will be spent on housing, pushing up the value of real estate properties," the central bank added.
While base and income effect combined have increased by 345 percent since 2006, the REPI has only risen by 326 percent.
"Qatar's fast growing economy and rapid population growth seem to justify a rapid increase in real estate prices, which remains in line with other nominal developments in the economy," said the index.
"Further rapid increases in real estate prices could, however, signal overheating and a potential for another real estate bubble," it added.