Why you should still buy a property in Dubai

First, long-term residents should be considering buying to replace rental payments. Even if your home is worth a fraction of what you paid for it after 10 years, this would still be a huge improvement on the negative return of renting.

Second, property prices look cheap by international standards, and rental yields are still high. Less than $1,000 per square metre for a villa in a prime location is plain cheap, and Dubai is an expensive place with high salaries.

Thirdly, there is a big change in the city's geography underway. What is the fringe of Dubai today, the Dubai Marina, will be uptown Dubai of tomorrow. Thus property values will follow this curve upwards, as people relocate to the new uptown.

Fourth, we need to tackle the legal canard. In brief there is no law to prevent freehold purchase in Dubai, and a new federal law should shortly frame legal rights into a form acceptable to international banks for mortgages; this will push demand and prices higher.

Oversupply is the main fear highlighted by skeptics. But there can only be so many properties in prime locations, and the time to buy them is now. The oversupply, when it happens, will be found in the less desirable properties further out in the desert or in low-specification high-rise.

Furthermore, oversupply depends on how demand develops. It is highly probable that the demand for freehold property in Dubai is much higher than most imaginations can comprehend. Certainly an economy growing at 10% plus a year has a dynamic of its own that reflects a huge demand for accommodation.

However, it is possible that the Government of Dubai is overdoing it a bit, and we could see an oversupply, particularly in the high-rise apartment sector, in 1995-6.

There is also the valid worry that interest rates will start to move up around this time. But any property market is going to have its ups and downs, and Dubai will be no different.

Dips in the market represent a buying opportunity. All the same, Dubai has a habit of frustrating those who wait for bargains. In 1998 some thought rental prices would collapse. It did not happen.

The key to understanding this phenomenon is that Dubai is still largely a cash market without much borrowing. That means landlords can sit out downturns in the market and that downturns tend to be shallower than elsewhere.

Of course, if there is a boom in mortgage lending over the next few years this factor could be mitigated, but we will have to see it first. Buy in Dubai? Yes, unless you have a good reason not to.