News

A recent spike in real estate values in Dubai is bringing back echoes of the Emirate’s property-market crash four years ago.

The International Monetary Fund has estimated the residential market is up 16% in the 12 months to April with the real estate consultancy CBRE painting an even frothier picture, saying in a recent report that rents went up by more than 30% in a year. The reported commenced that even the lagging office sector was seeing a rebound.

Dubai’s government has already taken a cue from the real estate recovery, launching several major new developments in the past year. The largest so far is Mohammed Bin Rashid City, a sprawling master plan smack in the middle of Dubai which is understood will house the world’s biggest shopping mall, surrounded by huge parks and numerous hotels.

In its report, the IMF recommends that the UAE raise fees on real estate transactions if the rebound looks to be getting out of hand. According to the IMF this would give the government much-needed revenues to fix its fiscal position while also introducing a measure of calm into the market. Fees on property transactions are presently just 2%.

The IMF also recommends that the UAE’s central bank quickly introduce new caps on mortgage lending loan-to-values and on banks’ exposures to the government-owned companies that played a central role in the previous real-estate boom. The hope is that these measures will provide an extra margin of bubble protection.

Mohammed Nozmul Islam, CEO of Dermarr Brokers LLC a company representing the Pervaiz Naviede Family Trust commented, “It’s encouraging over the last year real estate in Dubai there has been a significant increase in demand. However, we have advised our clients that procedures introduced by the Government are in place to ensure this isn’t a bubble and, from our own research, it would appear the majority of transactions are for end users.”