Dubai: Recent speculation that the upturn in Dubai’s property values could lead up to a new bubble is being discounted by market observers… at least for now.
“I think we’ve learnt from the previous correction that prices can’t just keep going — people are a bit more realistic about prices,” said Mark Phoenix, managing director at Omniyat. “Regulations and market maturity mean buyers and developers are safer than ever.”
Property values in Dubai are up by more than 22 per cent, according to a Jones Lang LaSalle report released earlier this month.
Significant fund flow is coming in from Central Asia, Russia and China into local property. “It is these cash injections that are driving the market,” said Craig Plumb, head of research at JLLS.
In a response to the property market’s hot growth streak, Dubai’s authorities have increased the transaction tax from 2 to 4 per cent. Plumb said a capital gains tax that came into effect when a property was sold and not purchased would have a bigger effect on boxing speculators out of the market.
“A scaled capital gains tax where the longer you hold on to the property the less tax you pay would have been an ideal alternative,” he added.
Despite caution, it is evident that market sentiment has rebounded in Dubai. Several local and regional developers told Gulf News ‘Dubai is back’ on the sides of Cityscape Global in Dubai with many adamant the sentiment was here to stay.
According to Masood Al Awar, CEO at Abu Dhabi-based Tasweek, indicators suggested growth would continue. “The increase in transactions, greater transparency and return on investment mean that growth is sustainable,” said Al Awar.
Some believe the market’s performance is being driven by tourism growth. Dubai is targeting 25 million visitors in 2020 if the emirate is successful in its Expo bid.
Plumb said the majority of private and government projects are not directly linked to Expo and will go ahead irrespective of the event.
The rise in prices in the year to date is a growing concern but Plumb said that it has not turned critical. “There are signs of a bubble emerging in the future... but not there yet,” he said.
