Dubai - the world's hottest property market?

Photo: Sboyd

Dubai has enjoyed one of the biggest market turnarounds in recent years. The market crashed in 2008 as a result of the financial crisis, with house prices plunging 53 per cent between Q3 2008 to the same period in 2011. Since then, though, investors have returned to the emirate in increasingly huge numbers, as international demand has fuelled rising prices and racing transaction numbers.

Indeed, according to Knight Frank's global house price index, Dubai's property market has been ranked the fastest growing in the world consistently for some time. In the first half of 2014 alone, almost half a million residence visas were issued, as overseas interest remained strong.

The Dubai Land Department reveals that 478,451 visas were issued in Dubai between January 2014 and June 2014, with transactions totalling a staggering AED 37.5 billion.

Now, Global Property Guide has ranked the emirate the hottest housing market in the world, with its analysis revealing house prices in Dubai have risen 27.32 per cent annually in Q3 2014, outpacing 2013's rise of 23.42 per cent.

Such growth, though, has sparked concerns among experts that the market could be over-heating and heading towards a bubble. As a result, mortgage caps and other restrictions on off-plan investments have been introduced to dampen speculative buying and selling of Dubai real estate.

The measures have caused the market to cool considerably in the second half of 2014. According to GPG, prices increased by only 0.31 per cent during the three months to September 2014, while Knight Frank's Q3 data suggests that Dubai's prices fell 1.6 per cent on six-month basis and, on a quarterly level, by 5.2 per cent; its first quarterly decline in four years.

With Ireland now overtaking the emirate as the fastest growing housing market in the world, is Dubai set to cool down rather than maintain its hot streak?

The figures remain optimistic, if significantly moderated compared to the booming years. The IMF forecasts GDP to grow 4.3 per cent in 2014, down from 5.2 per cent in 2013.

With residence visas continuing to be handed out, Josine Heijmans, Exhibition Director for The International Property Show 2015, says that the UAE’s rising population will ensure that demand remains strong in the near future. She highlights that growth in the real estate sector is also owed to concrete demand from residents (first time buyers and renters) as much as investors from other countries drawn by cooling yields.

Nonetheless, overseas interest is still present: according to the Dubai Land Department, Indian investors spent more than Dh10.5 billion during the first half of 2014, while Britons spent another Dh5.8bn in the emirate.

As Sharjah becomes the latest emirate to open up its market to foreign buyers, the International Property Show 2015 organisers are confident for the near future.

Heijmans says that exhibitors share "high optimism" for the real estate sector in coming years.