DUBAI: Growth in real estate demand in Dubai has been due to an improving economy, not speculation, the emirate’s Land Department said yesterday after the central bank warned that the property market might be overheating.
“Growth in demand from investors is a result of an improvement in fundamental economic factors, rather than down to speculation,” Dubai Land Department Director General Sultan Butti Bin Mejren said in a statement.
He also said Dubai’s doubling of the fee it charges on property transactions to 4 percent last year was helping to stop speculators.
Mejren did not comment directly on whether his department, which oversees the real estate market, might take fresh steps to cool demand.
But his remarks indicated he was broadly satisfied with the current situation. He noted that the United Arab Emirates’ success in attracting businesses to invest depended partly on having low costs.
“Dubai has become a global player and therefore fees for providing services have to be on a par with the city’s growth and development,” he said.
The United Arab Emirates central bank warned on Sunday that low residential rental yields in Dubai and Abu Dhabi might indicate growing imbalances and overheating in the real estate sector. It was the first official warning about soaring property prices.
House prices in Dubai, which nearly defaulted on its debt in 2009 after a property bubble burst, jumped 27.7 percent from a year ago in January-March, leading the global rankings for a fourth straight quarter, according to consultancy Knight Frank.
In some areas, prices are back near pre-crisis levels.
Last month the International Monetary Fund warned that Dubai might need stronger tools, such as higher fees or taxes, to rein in real estate speculation.