Despite the soaring rise in Dubai apartment prices - up 38 per cent over the past year - the property market is not heading for another crash, says Standard Chartered.
The British bank said research showed that unlike the 2007 Dubai property boom, which was followed by a two-year-long crash when house prices halved, the recovery this time around appeared to be more sustainable.
This was because price rises were being driven by growth in the logistics, hospitality and retail sectors and an increase in the population of the city rather than speculators attempting to flip property for a quick profit, the bank said.
However, Standard Chartered added that there was a risk that the fragile recovery could change to be speculator-driven again if the authorities were not careful.
The three months to the end of June marked the fourth consecutive quarterly increase in house prices across the city, the bank said, with prices rocketing 38 per cent for apartments and 24 per cent for villas over the year. At the same time apartment rents rose 20 per cent and villas rents were up 17 per cent.
Housing values rose the fastest at The Greens, where apartment prices increased 44 per cent over the year and by 15 per cent over the quarter. At Jumeirah Village, villa prices rose 40 per cent over the year and by 25 per cent over the three months to the end of June.
StanChart said rising rents were pricing tenants out of the most expensive developments, in turn pushing up rents in cheaper areas. This meant that International City was currently the area of Dubai reporting the fastest rising rents, with average annual rents up 27 per cent year on year and 11 per cent over the quarter.
The Springs area had the second highest average rises, with rent rises of 35 per cent over the year and 10 per cent over the quarter.
"The recovery of Dubai's housing market started in 2011. It has set the scene for a slow, strong and persistent rise in housing prices, pulled by real demand for housing from end-users and a steady supply of new developments to match it," said the report by the bank.
"The market seems to be driven by fundamentals rather than excess speculation, in contrast to what the market went through in 2008. The outlook of the market will therefore depend on how these fundamentals evolve . Right now, we conclude that there are no serious indications of a speculative bubble in the housing market."
Last month a Cluttons report said house prices in the city rose by nearly a third during the first half of the year - increases the property broker described as "less concerning than in 2008, given the number of end-users in the market".
"We are still far off the previous peak, when growth was far more unsustainable," said Steve Morgan, the head of Cluttons in the Middle East.