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Speculative demand is boosting Dubai’s property

Value of houses in Dubai shoots up

Only one-fifth of sales this year were through mortgages, as banks remain reluctant to lend, indicating that some speculative buying by investors has returned.

December 9, 2012 3:29 by



The average apartment price in Dubai rose by 13 percent this year and is expected to grow at the same rate next year as speculative buyers prop up demand, a study released on Sunday showed.

Prices rose despite expectations of around 36,000 new units forecast to enter the market in the next two years, a study by property consultancy CBRE showed.

“Because the best quality products (properties) are seeing this demand, they are raising the rest of the market,” said Matthew Green, head of research & consultancy UAE at CBRE Middle East.

Dubai’s residential property prices have slumped by over 60 percent since its peak prior to the financial crisis. Off-plan purchases and speculation had created a real estate bubble that burst after the economic slowdown in 2008.

However, the emirate has recently begun to announce big projects similar to those built during the boom period.

The latest announcement was in November by Dubai’s ruler Sheikh Mohammed bin Rashid al-Maktoum, who revealed plans to build a complex including 100 hotels and the world’s biggest shopping mall.

Only one-fifth of sales this year were through mortgages, as banks remain reluctant to lend, indicating that some speculative buying by investors has returned.

“Only 20 percent of the sales were through mortgages. So there is some speculation creeping back into the market. We also saw some off plan announcements and we have to keep a watch on this,” said Green.

A majority of the new supply is expected from secondary locations like Dubailand, Motor City and DubaiSports City.

Meanwhile, rental prices in the emirate, home to the world’s tallest tower, rose by an average of 17 percent over the past 12 months, said the report.

The study attributed the rise in rents to the sustained period of population growth, positive economic performance, increased occupier demand, and limited availability of quality units in the desirable locations.



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