The residential real estate market in the Emirate of Dubai is heating up again. A report published recently by international real estate consultant Jones Lang LaSalle (JLL) says that home prices in Dubai are only 15% away from their 2008 peak. The report also predicts that residential real estate prices in the emirate will reach or break the pre-financial crisis highs by mid-2015 at the latest.

Dubai

“We are expecting prices to get very close to pre-crisis levels by the end of this year. It has already reached that level in some locations,” said Craig Plumb, JLL’s head of research for Middle East and North Africa, said at a recent conference on developing trends in United Arab Emirates real estate. Plumb also said that prices will increase in 2014, but not as fast as last year.

Dubai, fastest-growing property market in the world

JLL also reports that the Emirate of Dubai is the fastest-growing global property market over the last 12 months. Prices in the Dubai real estate market increased by 22% overall, with large increases in both the residential and commercial real estate sectors driven by huge government spending on a number of real estate and infrastructure projects.

The JLL report highlighted that rents for new home leases in Dubai will increase by 10-20% over the next 12 months. The report also pointed out that 27,000 new homes are scheduled for completion in 2014, but that is probably an unrealistic number given labor and equipment constraints. “Not all will get built on time. So we can say at least 20,000 units will enter the market,” Plumb commented.

Fear of another “property bubble”

Some analysts and media pundits are suggesting that the emirate’s current real estate boom has the look of a speculative bubble that could blow up in the not-too-distant future.

According to Plumb and the analysts in the JLL report, however, this situation is not really a “bubble”. Thy argue there is little of the irrational exuberance that typifies bubbles. They say most investors seem more cautious and a slew of recently-introduced government regulations to fight speculation are having their intended effect.

Earlier last month, the IMF also weighed in, issuing a warning about a real estate bubble if huge government projects are not carefully managed.