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Average rental for residential property in increased 17 percent last year while villa rentals rose 14 percent following a rebound in the emirate’s sector, according to a new report.

The in property prices has helped spur a number of developers to launch off-plan properties but speculative could be a concern, real estate consultants CB Richard Ellis () said in its quarterly review of the Dubai property .

“Whilst the return of off-plan has so far been modest, a rise in speculative activity is clearly something to monitor closely over the coming year, particularly in light of recent regulatory changes,” noted the report.

Dubai’s real estate market is starting to show signs of recovery after house prices crashed by almost 65 percent during the emirate’s 2008-debt . Gross domestic product increased by 4.1 percent in the first half of 2012, putting it on track to reach the government’s forecast of 5 percent, according to Dubai Statistics Centre.

Dubai’s government and several state-backed entities have announced new projects in recent months, including Mohammed Bin Rashid City, which will host the world’s biggest shopping mall, as well as a US$3bn theme park in Jebel Ali.

Concerns that property prices could lead to another bubble prompted the UAE Central in December to announce plans to restrict mortgages for expatriates to 50 percent of the value of the property and 70 percent for Emiratis. UAE commercial lenders last week said they would request the central ease the limits.

A mortgage cap is unlikely to dampen demand among speculative buyers, said CBRE.

“Whilst the move may have a moderate cooling effect on overall sales levels, current market growth is being driven by cash investors rather than the end-users,” said the report.

“In 2012, Dubai’s mortgage market was estimated at 20-30 percent of total residential transactions, reflecting a high degree of liquidity in the sector. This is a trend that is arguably more difficult to manage and control, at least without further regulation or the implementation of higher taxes and levies on property sales,” it added.

The introduction of a real estate protection law, which enables investors to get a full refund if a developer fails to complete or hand over the property within a specific time frame, will help “further solidify the recovery, underpinning confidence and crucially regulating the off-plan market”, added the report.

Average office rents declined by 4 percent last year following a rise in the number of tenants relocating from older properties to newer, better quality buildings. While some offices in prime locations managed to increase their headline rents last year, buildings in Business Bay and Dubai Silicon Oasis continue to suffer from high vacancy rates.

“Strata title office buildings area still considered unattractive by most large occupiers and corporate tenants due to the complexities of multiple ownership across the property and the resulting inefficiencies this creates,” said CBRE.

Source:  http://www.arabianbusiness.com/dubai-residential-rents-up-17-in-2012-cbre-486591.html

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