Dubai prices cool after a two-year roller-coaster ride
JLL sees a 'welcome levelling off' in residential sale prices and rents in the third quarter
Dubai property prices are cooling to "healthy" levels after a two-year rally during which real estate rebounded from a slump when the global financial crisis hit in 2009.
Developers at a property show have rolled out scale models of latest projects, including Mall of the World, a larger-than-life venture announced in July complete with temperature-controlled high streets, a theme park, hotels and a theatre.
Dubai property prices have been on a roller-coaster ride over the past 10 years.
The market began expanding when it was opened to foreigners in 2002 and peaked at record highs in 2008, driven mainly by speculative investments.
Prices took a nosedive in 2009 as finances dried up in the global financial crisis, shedding half the value of the sector.
But a revival in demand propped up values and rents at breakneck speed, stirring fears of another bubble.
Data shows that sale prices surged by 56 per cent and rents by 41 per cent since August 2012, according to Dana Salbak, a senior research analyst at JLL.
"We realise that this was very unsustainable," she said on the sidelines of the annual Cityscape property show in the emirate, pointing out a "welcome levelling off" in sale prices and rents in the residential sector in the third quarter of this year.
"We see the residential market stabilising. This is a healthy and sustainable level. We welcome prices and rents as they are," she added.
A JLL report put growth in sale prices and rents in the third quarter at just 2 per cent and 1 per cent, respectively.
Knight Frank real estate consultancy also noted that prices and rents have cooled down.
"The growth rate has been weakening," after having entered positive territory in mid-2011, the agency said in an autumn report.
It said a government decision to double transfer fees and a central bank cap on mortgage funding, introduced in the last quarter of last year, were behind the slowdown.
"The government has played a major role in curbing speculation," said Salbak.
In the pre-crisis period, Dubai developers built grand projects, turning swathes of the emirate's desert into urban neighbourhoods and business centres.
A combination of investor appetite and available finance led to the launch of scores of projects at the same time.
It all came to a halt when investors vanished along with a drying up of international finance triggered by the crisis. Many projects were cancelled or put on hold.
Developers have learned a lesson, according to Salbak.
"They are phasing out their projects in a longer timeframe and they are trying to secure more resources for funding, instead of relying on off-plan sales," she said.