‘Unsustainable’ Dubai Home Price Gains to Slow, Broker SaysZainab Fattah
Dubai home-price increases will slow in the next 12 months after rising at an “unsustainable rate” as speculators returned to the market, Jones Lang LaSalle Inc. said in a report today.
Values rose 17.9 percent through August from a year earlier, the broker said. Residential rents climbed 14.9 percent on average. While the market has fundamentally improved, the return of confidence has sparked renewed speculation, Jones Lang said.
“While residential prices and rents will continue to increase over the next 12 months, the rate of increase will decline somewhat,” the broker said. “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 broker Knight Frank LLP showed, raising concerns that another bubble is in the making. The revival has prompted a return of advance sales, known as off-plan transactions, that fueled speculation before the market collapsed in 2008. Last week, the Dubai Land Department said it will double the property transaction fee to 4 percent starting Oct. 6 in a bid to limit speculation.
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, the broker said.
While the property market has heated up, it’s not in a bubble, HSBC Holdings Plc said in a research note today. The lender raised its share-price estimate for Emaar Properties PJSC to 8.3 dirhams from 7.5 dirhams, saying Dubai’s biggest developer by market value is “well positioned.” Prices have surged 33 percent since a January 2011 trough, HSBC said.