Dubai Rents Rocket As Property Shakes Off Problems

Real estate advice firm CBRE says the upward trend ‘is unlikely’ to extend into 2013, though another property firm says it will ‘shift up a gear’.

In a report CBRE reckons Dubai’s residential property sector ended 2012 on a high after seeing sales and leasing rates increase.

Figures shows that average rents for residences soared by 16% last year while leases for apartments grew by 17%.

Though Dubai’s market for renting villa saw a big increase in supply, owners were still commanding 14% more in rents than in 2011.

“Confidence has returned to Dubai’s’ property sector which has seen several years of decline and the activity is being driven from cash investors,” said CBRE.

Haven for property investors

“Recent government initiatives such as a renewing their commitments to major infrastructure projects have also helped the market in Dubai pick up.”

The report also highlights that Dubai is benefiting from investment because it is seen as a ‘haven’ by investors.

Off-plan sales have led to mixed fortunes for developers in recent years but even those sales are starting to pick up.

The CBRE report points out: “The upturn is modest but there is a rise in speculative activity which should be monitored closely in the coming year.”

Recent moves to deal with property speculation in the United Arab Emirates include a plan by the UAE’s central bank to restrict mortgages to 50% of a home’s value to foreigners buying their first property and to 70% for nationals.

This comes after the global economic crisis which saw some local banks over-exposed to debt in the sector and the new regulations have led to a drop in people buying with a mortgage.

More property tax feared

The CBRE concludes that Dubai’s property upswing is being led by cash investors looking to buy assets rather than by those looking to buy homes.

To underline this, mortgages in Dubai accounted for between 20% and 30% of all property transactions last year, highlighting the high amount of liquidity in the market.

A spokesman for CBRE said: “The trend for cash investors is more difficult to control and manage so it should be expected that more regulation or higher taxes and levies on property sales will be introduced.”

The report’s finding were backed up by property consultancy Jones Lang LaSalle which sees economic growth fuelling demand, especially from the Asia Pacific region, and that because transactions increased by 65%  last year, sales will continue to recover and ‘shift up a gear’.