Property consultants in Dubai are concerned that the escalated property prices may mean the Gulf city faces yet another economic bubble.
Dubai, which forms the hub of the oil-rich UAE (United Arab Emirates), has long had an affinity for colossal buildings and projects, including the Burj Khalifa - the tallest building worldwide - and copious artificial islands designed to resemble the world map.
A report in The Daily Mail says that Dubai continues to recover from the 2009 fiscal crash that led to property values being slashed by more than 50 percent and which forced the local government to seek a $10 billion bailout from neighboring Abu Dhabi. Even after the frenzied building explosion came to an abrupt halt in Dubai, local companies continue to repay billions of dollars in loans.
Jones Lang LaSalle's annual report on the UAE's real estate trends pointed to several concerns, including untenable growth in property prices as well as speculative buying. Prices escalated further after it was revealed that the city would host the World Expo this November.
Experts have been anticipating another economic bubble for quite some time now. Earlier this year, the International Monetary Fund (IMF) issued a statement saying that the threat of an impending economic bubble would worsen if the mega projects in Dubai were not executed prudently. This would pose additional danger for the banking system and companies related to the government.
Describing the rising property prices in 2013 as "irrational," Jones Lang LaSalle stated that although the prices would rise further, it would not be as high as in the previous year. It noted that investment from local as well as global investors in the real estate market was relatively strong, with 2013 alone seeing a $44 million injection. This will keep Dubai's economic growth rate at 4.5 percent during 2014, the report said.
The renewed confidence has resulted in the commencement of various projects that were previously shelved, stalled or discarded during the financial crisis in 2009, including work on the Dubai waterfront and the Dubai canal.
Nevertheless, the report also noted that this time, the investors are extra cautious. Many are of the view that new regulations, such as the doubling of fees for property registration, may again result in the escalation of property prices, especially for new houses.
