Fears that Dubai’s real estate market is overheating are exaggerated, according to report from Goldman Sachs, with recently introduced regulations and large volumes of supply likely to cool soaring property values.
Property prices in the emirate remain about 36 percent below the peak reached just before the previous bubble burst in 2008, the Goldman report said, despite increasing by about a third since hitting a trough in early 2011.
A separate report by consultant Jones Lang LaSalle published earlier in October claimed residential house prices in Dubai were increasing at an unsustainable rate and may see correction over the next 12 months.
House prices in the emirate have climbed more than 22 percent over the past year – higher than any major global market – as billions of dollars of government real estate projects triggered a buying binge and stock market bull run that has caused concern at the International Monetary Fund.
Data from the Dubai Land Department shows 80 percent of real estate sales in the first half of 2013 were cash transactions, suggesting the speculative buying that the emirate witnessed in the previous boom period is regaining traction.
Dubai’s property market prices collapsed by over 60 percent in 2009 after the global economic crisis. The IMF warned in July that overspending could leave Dubai vulnerable to another debt crisis if global market conditions deteriorated.
Authorities in Dubai have introduced measures intended to curb speculation in recent months, including a doubling in property registration fees from 2 percent to 4 percent. The central bank is also planning a cap on home loan purchases, although these plans have been delayed amid protracted negotiations with commercial lenders over the exact extent of lending limitations.
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