House prices in Dubai were the fastest-growing in the world in the year to September, helping to push the global average to a new pre-crisis peak.
According to Knight Frank, house prices in Dubai rose by 28.5 per cent in the first nine months of the year – the biggest increase of any of the global markets the estate agent tracks.
However, the report, published on Friday, found that prices in the emirate were showing some signs of cooling down; rising by 4.5 per cent in the third quarter of the year after a 7.3 per cent rise over the previous three months.
Dubai was followed by the Chinese cities of Beijing and Shanghai, where prices rose 21.6 per cent over the year to the end of September, Hong Kong (16.1 per cent) and Taiwan (15.4 per cent).
The Asian house price booms pushed Knight Frank’s global house price index up 4.6 per cent over the 12-month period up to September 2013, taking it 4 per cent higher than its previous peak reached in June 2008.
The global index now stands 12.7 per cent higher than its financial crisis low recorded in June 2009.
Kate Everett-Allen, Knight Frank associate for international residential research, called Dubai’s rebound “impressive”.
“The index’s strong performance has been assisted not just by headline-grabbing price rises in Dubai, China and Hong Kong, but also in a number of emerging markets,” she said.
Knight Frank reported that the index was also boosted by a resurgence in previously hard-hit European markets such as Ireland which reported a 4 per cent increase over the third quarter – a turnaround for the country which less than two years ago was reporting average price falls of 5.4 per cent each quarter.
“During the global financial crisis Asian housing markets largely compensated for the weakness of Europe and the US,” Ms Everett-Allen said. “With the UK and US housing markets now picking up, the euro-zone debt crisis receding (at least for the moment) and prices in many key Asian markets still recording double-digit annual price growth, the index is experiencing a strong surge.”
Knight Frank’s figures for Dubai are less dramatic than those of property broker Cluttons, which reported last month that average house prices in Dubai grew by 53 per cent over the year to the end of September. Cluttons also reported a slowdown in the third quarter, with prices in the emirate increasing 8 per cent during the three months to the end of September – a respite from the 23 per cent increase the company reported for the previous three months.
Evidence of a slowdown in such rampant house price inflation could be attributed to Dubai Land Department’s decision in September to double the transfer fee on each sale from 2 to 4 per cent. The move was made to reduce the number of so-called property flippers who buy off-plan flats then sell them almost immediately to capitalise on the rising market.
News of soaring property prices in the emirate has led some analysts to continue to draw parallels with the sort of astronomic house price growth experienced in Dubai before the global financial crisis, where after surging, prices suddenly fell by as much as 60 per cent.
Last month Sultan Al Suwaidi, the Governor of the Central Bank, dismissed fears of another damaging bubble in the property market, saying that a more prudent approach by bank lenders and recently introduced mortgage caps would prevent a rerun of the 2008 housing market collapse.
“I think there is no possibility of a new bubble in the real estate sector for two reasons,” he said.
“I think banks have gone through the experience in 2006, 2007 and half of 2008. They know exactly that things that go up cannot go up for ever. I don’t think they will overextend themselves in the real estate sector.
“Number two, I think the new regulations regarding mortgage loans … will balance the whole issue. We’re not worried. We can sleep at night.”
But with Dubai now gripped by positive sentiment following last month’s historic Expo 2020 win, some brokers are warning that more price growth is again on the cards.
“While the Expo will result in long-term benefits to the Dubai economy and the real estate market, the short-term impact needs to be managed carefully to avoid the inevitable boost in sentiment translating into excessive price growth or over development,” said Alan Robertson, regional chief executive of Jones Lang LaSalle.