Imf says dubai must do more to avoid bubble
Photo credit: Chusico
Dubai's property rebound has been one of, if not the, biggest turnaround since the global financial crisis. Values have soared in recent years, driven by strong demand and a stable economy, as confidence climbs among investors. According to knight Frank, property prices rocketed 35 per cent in 2013, a growth that has led many to speculate a bubble is on the horizon.
Indeed, several developers have introduced new limits on sales to decrease the risk of speculative buying, while mortgage caps have also been implemented.
“Our own view is that these measures are good... but it’s time to consider stronger measures,” said Masood Ahmed, director of IMF Middle East and Central Asia, last week.
Others have argued that prices remain below previous peak levels and that growth is set to continue in a stable way for some time .
"All indications show that this growth is sustainable," said Khalid Bin Kalban, managing director and CEO of Dubai Investments, last month.
HSBC has forecast that growth will continue, but at a less rapid rate, with prices climbing 10 to 15 per cent in 2014 compared to the 35 per cent recorded last year.
Indeed, new figures from Knight Frank's Prime Global Cities Index show that prime property in Dubai saw values edge up 0.6 per cent in the first three months of 2014, far below a 5.4 per cent rise recorded in the same months last year. On a six-month basis, prices grew 1.7 per cent, also much slower than the previous year.
Nonetheless, Dubai's market may get a boost in the coming years from another source: the Dubai Metro.
The extension of the transport network is being undertaken as part of the preparation for the property show Expo 2020, which Dubai was selected to host thanks to its strong housing market. Values of property near Metro stations climbed 34 per cent between 2009 and 2012 - when it was complete - according to the Roads and Transport Authority Strategic Planning Department. The addition of another 21 stations could well drive property prices even higher.
Jonathan Fothergill, Head of Valuation for the UAE at Cluttons Middle East, told the Arabian Gazette, “Connectivity is a challenge in a city that expands as rapidly as Dubai, but the Dubai Metro has been instrumental in linking communities and improving the lives of commuters by providing an alternative to our busy highways."
While work continues on the Metro, interest is developing overseas too. On TheMoveChannel.com, enquiries for UAE property in April 2014 shot up. The emirates accounted for 1.44 per cent of activity on the site, making the country the 12th most popular in the world - the highest ranking the country has ever had.
Whether a Dubai bubble is forming or not, confidence is certainly not about to burst.