A certain amount of speculation in Dubai’s property market is “acceptable”, according to the head of the emirate’s real estate watchdog, as long as these purchases make up less than 20 percent of transactions.
Marwan Bin Ghulaita, CEO of the Real Estate Regulatory Authority (RERA), said that developers had introduced their own measures to limit practices such as ‘flipping’ and that no new projects were being launched without a 20 percent guarantee against construction costs.
Property prices in Dubai have gradually been rising over the last year after a real estate bubble burst in 2008, causing prices to crash by up to 60 percent. Prices and rents rose for the 16th consecutive month in March, according to a Deutsche Bank report, leading some observers to comment that the market could be overheating.
“A certain amount of speculation is acceptable. If we say 20 percent, or 10 percent is speculation, it is always OK for the market, because there will always be first-comers,” Bin Ghulaita told reporters at a press event in Dubai. “They will be the people who will take the challenge and the risk to invest in any such project.”
He said that RERA had no plans to introduce more regulation on Dubai’s real estate market, as developers were increasingly self regulating. “The [steps] that the developers have taken are enough measures. If you go to Emaar nowadays you cannot sell until you pay 40 percent, and with Nakheel you give the PDCs (post-dated cheques). The mechanisms, the developers are putting in themselves to stop this speculation – I think it’s working now,” Bin Ghulaita said.
He added that much of the onus now fell on property investors to do their “homework” when buying into the emirate’s real estate market. Since Dubai’s last boom, many projects have been placed on-hold or cancelled, leaving many of those buyers out of pocket.
“My advice to all new investors is ‘do your homework’. All rules and regulations are in place now. The only thing is they need to do their due diligence more and more,” Bin Ghulaita said. “It’s not all on the regulations and the law – it’s on the [buyer] themselves, so he should know what he wants.”
According to date from real estate analysis firm Reidin.com, there were about 30,000 property deals worth a combined $19bn in Dubai during the first quarter of the year.