Will August be a boom month for property sales again this year?

Put yourself in the position of the average property buyer from the UK who already owns a property. Prices have been rising steadily in the UK since March 1993, and after a slowdown last year have recently been picking up again.

That means the cost of a semi-detached house in a small English town away from London is selling for around $700,000 and a one-bedroom apartment in the capital can cost the same amount. However, if you fly Emirates to Dubai things look very different.

A three-bedroom town house in The Springs will set you back $450,000, and a nice new one-bedroom apartment in The Greens about $200,000. Moreover, rental returns of seven to nine per cent are unheard of in the UK where four to five per cent is considered a good yield.

Strong rental market

This is what is attracting the foreign buyers who also appreciate that the rapid expansion of the population of Dubai is currently soaking up every villa or apartment that comes on to the rental market. Some are also looking for a holiday home in the sun for retirement, and Dubai fills that requirement nicely.

Therefore estate agents can once again expect a busy August. In Dubai this is traditionally a quiet month for business but for UK buyers this is the time when flights and accommodation are cheapest and they may also choose to combine an annual holiday with a property investment.

However, it is not hard to see that the Achilles heel is this flow of investor interest is not the Dubai market but the UK market. In the past it has been noted that Spanish holiday home prices and sales tend to drop like a stone if the UK housing market turns down.

13-year bull market

Things have been so good for so long in the UK housing market that home owners have forgotten that house prices can fall, as they did in the 1991-3 recession when prices fell by around 40% in London. For the moment last year's sluggish UK property market is forgotten but it could return particularly if the stock market enters a more bearish phase and money from The City dries up.

Nothing lasts forever and UK house prices look very stretched on many valuation indicators such as rental yield and mortgage to salary multiples.

Once these factors remind people of the reality of home ownership and bring the market back to earth then the flow of new foreign property owners will come to an end. But after 13 years of rising prices in the UK most commentators have given up predicting exactly when this might happen.