Where next for Dubai real estate?

However, the bullish conclusion is the correct one. Damac Properties has only a handful of cheaper apartments to sell where the Audi cars will represent a big discount - and only during the month of the Dubai Shopping Festival. The main recipients of the Audi cars will be the buyers of yet another Damac development to be launched this month, where the prices have not been announced.

Down on the ground AME Info's investigation of the marketplace showed very low availability - in short most developments are practically sold out, with only the least desirable properties available. Damac, for example, has just one two bedroom apartment in The Waves left at the back of the property.

Go over to Emaar Properties' The Greens opposite Dubai Internet City and the situation is worse, no more two-beds will be released until June or July at the earliest.

The second hand market - still mainly for off-plan options - is lively but premiums paid above the original asking price are rising. There have been some cheeky ones, such as the 11 villas fronting The Montgomerie Golf Course, $682,000 up from $490,000.

At least in this case you can see what you are buying. Not so at The Palm, Jumeirah where premiums of 20-40% are being paid on the selling price for off-plan options, with two years or so until completion.

However, these are all healthy signs. The doom-mongers predictions of masses of unsold apartments and overstretched developers do not seem true, although it is still hard to convince some people that all these apartments and villas have actually sold, and that there is not a massive conspiracy in place.

Reality will eventually strike. The Dubai real estate industry is being rapidly established. After all, it is barely 18 months since freehold was introduced and foreigners were allowed to own real estate.

Perhaps Dubai has just been lucky. High oil prices, a massive ongoing repatriation of Arab capital, low interest rates - this would fuel any investment market.

But Dubai has also been sensible. By kicking off the real estate sector by under-pricing the Palm Jumeirah villas this project has been given room to re-price and re-allocate resources among the different locations. This has carried the whole market with it.

Now the market needs more mortgage finance - the Amlak IPO later this month will help in that respect - and new lenders are starting to emerge. It also needs a new property law - although there is nothing preventing foreign ownership of real estate in UAE federal law.

Perhaps even more luck is in the pipeline. The huge inflation of building costs due to the euro and commodity price increases will certainly translate into higher real estate prices. That is because developers will either have to pass these costs on in higher prices, or stop developing which will eventually force up prices due to supply pressures and allow them to resume building.

If anyone asks you 'why should house prices rise in Dubai?' the easy answer is because it is going to cost more to build them. We live in interesting times in the Dubai real estate market and those bold enough to buy are going to make a lot of money.