By Andy Sambidge
New Knight Frank report says Dubai will see the highest price increases in the world next year
Dubai's real estate market is forecast to be the world's top performer in 2014, building on this year's rapid price growth, according to a new report by Knight Frank.
The property consultancy's Prime Global Forecast predicted price growth of between 10-15 percent next year, ahead of Asian powerhouse markets such as Beijing and Shanghai.
Sydney and Paris rounded out the top five markets for 2014 with predictions of up to 10 percent growth, the report showed.
Knight Frank said although new regulations such as the recent mortgage cap were likely to slow growth in the final quarter of 2013, price rise growth would probably speed up again in early 2014.
"Although there are signs that transaction volumes have fallen back since the introduction of these measures – which should dampen the quarterly rate of increase in the final three months of this year – we suspect that price growth will quicken again in the early part of 2014," the report said.
"In the last quarter of 2013 Dubai has seen a doubling in the transfer fee to four percent, mortgage caps for both expatriates and nationals and Emaar, a part state-owned developer, banning real estate agents from selling on off-plan property before completion. All of this has come into play in order to ease residential price growth in the emirate, which so far this year has been running at a rate of 18-22 percent year-on-year," it added.
Knight Frank also said that home buyers had been showing signs of taking a "wait and see" approach prior to the decision on the Expo 2020 which was awarded to Dubai.
Earlier this month, Knight Frank said Dubai's property market had seen the fastest rising prices in the world over the past year to the end of September.
Prices in the emirate increased by more than 28 percent since the third quarter of 2012 compared to an average rise of 4.6 percent across the 55 markets covered worldwide.
The index showed that Dubai real estate values have jumped nearly 12 percent in the past six months and by 4.5 percent since the previous quarter.
The recent increase in prices in Dubai has sparked fears of another price bubble being created.
But last month, Mohamed Alabbar, chairman of Dubai’s biggest developer Emaar, said the government will not allow "unjustifiable" rent increases to fuel a new price bubble on the back of the emirate's Expo 2020 win.
Concerns have been voiced that the Expo victory could cause property developers to build too many residential and commercial projects, and investors to pour too much money into them, inflating a speculative bubble that would eventually burst.
Such a bubble popped in 2008-2010, when the global financial crisis caused Dubai property prices to crash by more than 50 percent, shaking financial markets around the world.For all the latest real estate news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
HOW DO YOU MEAN BY UNJUSTIFIED RENT INCREASE?
INVESTORS INVEST TO GAIN. BEING LANDLOARD BY ITSELF IS A JOB AND THE INCOME OF LANDLOARDS COULD BE CATOGORISED TO BE FROM THE RENTS.
IF PRICES INCREASE THEN RENTS SHOULD ALSO BE INCREASED.
Renters paying the least and owners wanting the most is human nature.
However whenever thee is an imbalance, this always damages an economy as such it is never good for the country, the buyers and the renters.
It distorts the natural economy and drives up costs which ultimately would be borne by companies and consumers alike. A misallocation of financial resources, and eventualy a bubble that will burst and hurt the owners, the banks, the economy, drives rents down but then there are no one to take advantage.
I don't think that there will be a boom and burst this time. The Dubai real estate and property market is getting more stabilized due to strong investor trust. Not only expo 2020 but there are many other factors that are making Dubai's economy strong. Thanks
Investors buy property for ROI. Increasing rents increases ROI.
Property prices are not increasing because landlords increase rents. It is due to basic supply and demand. Rents only remian static when there is an over supply of property.
Controlling the developers is key, not punishing professional investors.
Money makes the worls go around. Not punitive restrictions.
Take it from a landlord who have been through two UK property crashes.
House price inflation is being caused by a shortage of good property - you must remember the UAE is only just recovering from the property downturn and developers haven't yet caught up with demand since you can't build buildings overnight.