Dubai Property Prices Are Still On The Up But How Long Can It Last?

A recent advert for a Dubai apartment tower offered readers the opportunity to buy into the development prior to prices rising by 10% on April. Either this is an extremely clever marketing tactic to get individuals to sign up to beat a price hike, or this indicates that the Dubai property market is far stronger than some may think.

A brief glimpse through the saturated pages of the property sections in local newspapers confirms that price levels are indeed on the up in 2006. If you look at apartments in The Greens or villas in The Meadows you will discover that 10% is around the typical rate of house price inflation so far this year.

How can this be explained? We are looking at completed property, ready for occupation rather than one of the many towers emerging from the ground in the Dubai Marina and Jumeirah Lake Towers area. But this does not explain the advertisement proclaiming a 10% rise for off-plan apartment prices.

Maybe the downward turn in the Gulf Stock Markets has led to a a second wave of investor interest in the Dubai property market . This is the case in classic investment theory ; a property boom will usually accelerate after a stock market crash due to a re-direction of funds from one asset class to another. Investors will adapt to seek the best returns.

It has to be said that Dubai property is still attractively or at most fairly valued, and that does leave some room for speculators to drive prices to more exceptional levels. Yields on Dubai villas of 7.5% compare very favorably with 2-3% available in more mature markets like the UK, and are therefore attractive to investors who will drive prices higher and rental returns downwards.

There is also the situation that the oversupply of property in Dubai remains somewhere in the future. At the moment apartments and villas ready for rental are snapped up in days as people are still flooding into Dubai to join in the economic boom.

This vigorous rental market again encourages investors, and certainly the upward force on rentals is still very clear, in spite of the 15% Government cap on increases which is extensively side-stepped by vacating property and re-letting it. so buoyant letting conditions are another buttress for property prices.

Unwearying delays to the delivery of new property also boost the demand for available property, and therefore rental and property values. This still represents an upward cycle - and the fall off in demand required to dampen the market is just not evident, even if the market is slower than it was 18 months ago.

The hard thing for buyers is to know whether to leap in now before prices and rents rise or to wait in aniticpation that the real estate market will correct itself like the local stock market. However, that could turn out to be a tedious and costly wait, even if this is the most likely outcome in the end.