Dubai real estate - second most expensive in world

Continued housing supply shortages and unprecedented price hikes in 2008 will make Dubai’s real estate market the second most expensive in the world, after the West End of London, HC Securities Brokerage said on Sunday.

“Accelerating growth rates have equipped expatriates with the means to rent houses at high rates, and the situation is least likely to be resolved in 2008 as the market is expected to be in short supply of housing units,” the Egypt-based brokerage said in its Economy Watch Bulletin.

Government caps have done little to address surging inflation caused by rapidly increasing rents across the region, HC Securities said, with GCC rents forecast to increase by a further 20% this year.

Dubai property prices unlikely to stabilize in next few years

The real estate prices in Dubai are unlikely to stabilize during the next five years, in case the rent-cap is not lifted, and if the government does not take initiative to implement measures that could contribute in improving the supply market, say experts.

Property price trends in DubaiA study of the Dubai real estate sector by the Dubai Chamber of Commerce and Industry (DCCI) revealed that demand and supply of real estate will reach equilibrium only in 2023, provided, the government does not interfere or bring in new policies.

The Director of DCCI's Data Management and Business Research, Dr. Belaid Rettab, said "Equillibrium is when demand meets supply, and the prices remain stable."



Imposing rent cap, apart from delaying the process of stabilizing the market, will not be able to address price hikes too. Being supporters of liberal business, we do not prefer to have rent caps. The simplest solution to prevent price hikes is to bring in more supply to the market. The government, apart from supporting development of mortgage sectors, will also have to arrange finance facilities to developers so that they could build more, Rettab said.

The DCCI study revealed that the property prices have increased by a 10 percent cumulative annual growth rate in the medium term. The long term increase was 4 percent, which translates itself into an average price hike of seven percent, equivalent to the current rent cap imposed by Dubai government.

The DCCI study revealed that the government policies will positively influence income, population, cost, financing availability, tastes and preferences of buyers and speculation of future prices that could contribute to increase in demand.

The increase in supply will depend on the financing, production inputs cost, construction technology and expectation of future demand.