Dubai property prices rise will slow in the next 12 months after reaching an “unsustainable rate” as speculators returned to the market. This was highlighted by the latest Jones Lang LaSalle report released today.
Values rose 17.9 percent through August from a year earlier, the real estate consultancy said. Residential rents climbed 14.9 percent on average. Here we must note that a number of similar reports state much higher numbers. While the market has fundamentally improved, the return of confidence has sparked renewed rapidly growing speculations.
“While residential prices and rents will continue to increase over the next 12 months, the rate of increase will decline somewhat,” JLL report stated. “An extended period of slower and more subdued growth would be far more beneficial for the overall market than a continuation of the current rates of increase followed by another severe correction.”
Dubai home prices increased 21.7 percent in the second quarter, the fastest pace in the world, a survey by a London-based broker Knight Frank LLP showed. Although it is not clear how the consultancy collects the data it analyses, such claims rise concerns that another bubble is in the making.
The revival of Dubai’s property industry has prompted a return of off-plan transactions, that fueled speculation before the market collapsed in 2008. Therefore the local authorities are stepping in with new regulations. Last week, the Dubai Land Department announced it will double the property transaction fee to 4 percent starting October 6 in a bid to limit speculation. Today, RERA warns Dubai real estate brokers to cease telemarketing.
Almost 45,000 new homes are expected to be put up for sale before the end of 2015 and that will keep the market competitive and temper the rate of price and rental growth.
Uncertainty remains a concern for the real estate sector as several factors and events evolve, notably Middle East instability, Dubai’s bid for the World Expo 2020 and the number of a major new real estate projects that are in the pipeline.