Dubai property developers tackle speculation

The leading Dubai property developers are tightening up their act to prevent speculation getting out of hand. Some will now not allow the re-sale of partly-paid apartments for two years, and transfer fees can be as high as 2%.

Similarly from the mortgage point of view, the maximum amount available to borrowers is now down from 90% in the early days to 70%, and repayment periods are shorter. This means that for people who might have bought two properties can now only buy one.

However, as argued many times in this column, the long-term case for investment in Dubai property has not gone away. The UAE is going through a phase of rapid, investment led growth spurred by high oil prices, and it is hard to see anything going wrong with the local real estate market against such an economic background.

Indeed on the contrary, as any junior executive will tell you in Dubai, rents are rising. Apartments that cost $5,500 per annum now fetch $8,200 a year. This is the front-end of the property demand curve and it is still pointing upwards.

Consider too that it will take an average buyer in Dubai 10 years of rental payments to pay for a house compared with 30 years of rentals in the UK.

The UK is an overstretched property bubble, not Dubai, which is an immature market that will take some years to adjust to global property valuation levels; this has only just begun and the upside for the long-term investor is very good.

You might ask why the UK Government is not taking action to squash its speculative bubble. It is a fair question.

Truthfully, nobody wants to admit this harsh reality, not least the Prime Minister who has just bought a $6.5m town house in London and clearly trusts his own market intelligence.

We will see what happens over the next few years to UK housing and the economy which is now under pressure from high oil prices.

At least in the UAE the authorities seem to have a grip on what is actually happening in their own backyard, while the UK Government has lost touch with economic reality and fuelled a massive speculative housing bubble that will cause immense damage when it bursts.