By Alex Delmar Morgan
Q2 figures show huge year-on-year rise but new report suggests slowdown in 2008.
Rampant inflation and a booming economy saw house prices in Dubai rocket by 76 percent in the year to June, a new report from real estate broker Colliers International showed on Wednesday.
While recording massive annual increase in property values, Colliers’ eagerly anticipated House Price Index for Dubai claimed house price growth slowed from 42 percent in first quarter of 2008 to 16 percent in the second quarter of the year, fuelling fears the market is heading for a slowdown.
Ian Albert, Colliers regional director said: “If you consider the performance of other global cities over the same period, Dubai offered attractive returns comparative to these markets.”
However Albert warned house price inflation would slow further.
“Looking forward to future quarters we expect a return to fundamentals as the demand-supply dynamic moves towards equilibrium,” he added.
Dubai has benefited from a six-year real estate boom triggered by the introduction of foreign ownership rights while an influx of expatriates has driven prices higher as developers have struggled to keep pace with demand for top-end apartments and villas.
Unlike Abu Dhabi, Dubai’s oil reserves are small, so the emirate has been forced to broaden its economy by developing tourism and building massive real estate projects like the offshore Palm island trilogy and the vast theme park Dubailand.
Increasing construction costs, rising inflation, rental growth and the weakening of the UAE currency, have all contributed to spiraling property values in Dubai, the report said.
Projects at or near handover saw a pronounced spike in prices, Colliers noted, with competitive interest rates and increased mortgage availability, also driving house price inflation.
In the year ending June, the cost of apartments grew by 83 percent, villas by 73 percent and townhouses by 38 percent.
The price of property under construction in the second quarter of 2008 stood at $519 per sq ft, with the cost of a completed home cheaper at $485 per sq ft.
A close associate of mine who had dinner with a minister was informed that EMAAR and Nakheel as well as other big developers have been asked to slow down on delivery of new units (face fines if need be) so as to keep the demand high and avoid a crash in prices! This is great news if you are a landlord holding completed properties but terrible if you are waiting for some sort of slump.
I doubt if there will be any slump in the property market. The prices are still good compared to some big cities in the world. There are many people who wants to invest, as most of the markets are facing a downward turmoil, UAE can be considered as the greenest of all investment pastures. Secondly more and more international companies are stepping their foot in the UAE. Thirdly UAE's economy is very controlled and something very inevitable has to happen to bring the economy down. therefore there might be a slowdown but no slump.
Housing shortage leads to higher rents- in Abu Dhabi.Housing availability and still higher rents -in Dubai. Majority properties are bought by Investors. Affordable housing for expats is not a major concern for anyone. UAE citizens have their seperate housing arrangements. So the question is who is this property boom for ?
Can anybody tell me the real value per square feet, I know this differs from one project to another, but is there any market analysis group who can tell what the real price should be ?