Low residential rental returns in Abu Dhabi and Dubai might suggest growing imbalances and overheating in the real estate sector, the United Arab Emirates central bank said on Sunday, in the first official warning about property costs.
House costs in Dubai real estate, which almost defaulted on its debt in 2009 after a property bubble burst, soared 27.7% from a year-ago in January-March, leading the international ranks for a fourth straight quarter, according to consultancy Knight Frank. In some places, prices are back near pre-crisis levels. Within an annual fiscal equilibrium report, the central bank said there was no buildup of vulnerabilities in the banking program, and it failed to signal that it planned to take any real action towards the Dubai real estate market.
House costs in Dubai real estate, which almost defaulted on its debt in 2009 after a property bubble burst, soared 27.7% from a year-ago in January-March, leading the international ranks for a fourth straight quarter, according to consultancy Knight Frank. In some places, prices are back near pre-crisis levels. Within an annual fiscal equilibrium report, the central bank said there was no buildup of vulnerabilities in the banking program, and it failed to signal that it planned to take any real action towards the Dubai real estate market.
With U.S. interest rates still ultra-reduced, any price increase in the United Arab Emirates still seems very improbable, particularly given the UAE dirham's peg to the dollar. But the caution of the central bank was striking because authorities in the United Arab Emirates virtually never discuss hazards that are economic in public.
"Present typical rental returns in Dubai and Abu Dhabi are approximately 70 and 130 basis points below historical averages, which could indicate developing imbalances and overheating property market," the central bank stated. "Tracking developments in the UAE property markets and the banks' publicity to it remains a core financial equilibrium priority," it included.
From their peaks, property costs dropped more than 50 per cent during the United Arab Emirates's last real estate crash. They are now climbing ardently again on the rear of advancement and strong economic growth by Dubai's state-connected firms in working through their stacks of restructured debt. The UAE's economy grew 5.2 per cent in 2013, the fastest pace since 2006, data from the national statistics office showed on Sunday.
In the previous year, authorities have taken some minor measures to head off another property bubble; Dubai doubled its charges on property transactions to four percent to restrain "flipping", in which traders buy and sell properties in rapid succession to make speculative profits.
"Present typical rental returns in Dubai and Abu Dhabi are approximately 70 and 130 basis points below historical averages, which could indicate developing imbalances and overheating property market," the central bank stated. "Tracking developments in the UAE property markets and the banks' publicity to it remains a core financial equilibrium priority," it included.
From their peaks, property costs dropped more than 50 per cent during the United Arab Emirates's last real estate crash. They are now climbing ardently again on the rear of advancement and strong economic growth by Dubai's state-connected firms in working through their stacks of restructured debt. The UAE's economy grew 5.2 per cent in 2013, the fastest pace since 2006, data from the national statistics office showed on Sunday.
In the previous year, authorities have taken some minor measures to head off another property bubble; Dubai doubled its charges on property transactions to four percent to restrain "flipping", in which traders buy and sell properties in rapid succession to make speculative profits.