Surging supply and unsustainable demand are a risky mix - the same combination that got Dubai into trouble six years ago, forcing state firms to reschedule tens of billions of dollars of debt and jolting financial markets around the world.

This time, the authorities say they are aware of the dangers, and they have taken regulatory steps to slow demand growth. But the steps are still modest compared to those by other global cities facing the same problem, such as Hong Kong and Singapore.

"It's too early to be calling top, but credit growth of that pace tells you that the cycle is accelerating rapidly," said Simon Williams, HSBC's chief economist for the region. "Such a huge increase in lending is simply not consistent with economic order and stable asset prices. The time for policy action is now, before bubbles really get going, not when they are already in place."

Dubai house prices posted the fastest year-on-year rise of any of the world's major markets in the March quarter for the fourth consecutive quarter, soaring 27.7 per cent, consultant Knight Frank said. Rents rose about 30 per cent on average in the same period.

The value of real estate deals in Dubai, with a population of 2.3 million, jumped 38 per cent in the first quarter to about 61 billion dirhams (HK$128.7 billion), the Land Department said.

There are good reasons for property prices to rise, including annual economic growth of 5 per cent and inflows of money from Arab investors seeking safety in a turbulent region.

While some prices have almost returned to their pre-crash peaks, they are well below some other global business cities. Prime real estate in Dubai costs between US$6,200 and US$7,500 per square metre, compared with between US$27,600 and US$33,700 in Singapore, according to Knight Frank.

The volume of real estate deals has not reached its pre-crash peak but demand is showing signs of slowing. Propsquare Real Estate said sales volumes so far this year were down about 25 per cent year on year as prices became less affordable.

"The gap between what the seller is asking for a property and what the buyer is willing to pay is huge at the moment," said Parvees Gafur, Propsquare's chief executive.

Yet the Land Department described the first-quarter surge in real estate deals as "impressive" and looked forward to more.

"We expect the next three quarters to be similarly active, especially as this period follows the launch of a number of stimulating economic projects in Dubai and the disclosure of some of the preparations for the city's hosting of Expo 2020," said the department's director general, Sultan Butti bin Merjen.

The government fuelled the property boom when it announced plans, in November 2012, for a huge development including the world's largest shopping centre, more than 100 hotels and a park almost a third larger than London's Hyde Park.

Meanwhile, most of the more than 200 man-made islands off Dubai laid out in the shape of a world map that symbolised the 2008 property market crash remain empty after state-owned developer Nakheel's near debt default in 2009.

The authorities have taken some steps against price speculation and "flipping", in which investors buy and sell properties - many of them unbuilt - in quick succession. Late last year, Dubai doubled the fee charged on property deals to 4 per cent, while the UAE central bank imposed caps on mortgage lending.

Some real estate developers have taken their own action; partly state-owned Emaar Properties allows resale only after about 40 per cent of payment for a property has been made.

But these steps are minor compared, for example, to a 15 per cent fee imposed on the quick resale of property by Hong Kong and a 30 per cent fee introduced by Singapore. Last month, the International Monetary Fund warned that Dubai might need to consider such tools as well.

In an annual stability report last week, the UAE central bank warned that the real estate market might be overheating. But it is unclear what further action it could take. With interest rates in the United States still ultra-low, any rate rise in the UAE is unlikely given the dirham's peg to the US dollar.

The supply side of the equation looks equally uncertain. Plans for real estate projects worth more than US$50 billion have been announced in Dubai over the past 18 months - but it is unclear how many will actually get built and how fast.

Major work is starting on some of them. After shrinking for 16 consecutive months, construction loans jumped 40.1 per cent from a year earlier in December last year to 181 billion dirhams, the fastest rate since June 2009, latest central bank data showed.

That far outpaced growth in total bank loans, which rose just 8.8 per cent in December to 1.1 trillion dirhams. And the lending boom is probably just beginning.

"We foresee an acceleration of real estate lending as developers launch new projects, and more local and expatriate customers seek to enter the mortgage market," credit rating agency Standard & Poor's said in a report last month.

A return to the full excesses of the pre-2008 boom still looks unlikely. The crash cleared some second-tier developers out of the market, and the companies that remain still bear the balance sheet scars of the last crash. This should encourage at least some of them to be more cautious.

Nevertheless, the risks may be substantial in the next few years. Any sudden loss of confidence by a large proportion of foreign investors, or sharp tightening in US monetary policy, could ignite a pull-back in the market, S&P said.