The property market in the region is in danger of becoming overstretched, industry officials, whose remarks were given on condition of anonymity, said at a recent conference in Dubai. "If the costs get too high, Dubai won't be so attractive," the chief executive of a real estate project development in Oman said.
Dubai's real estate dealings equaled $18 billion in 2006, and current estimates reflect a staggering $158 billion is invested in the sector just in Dubai.
A Financial Times outlook has showed Dubai is 'at the cutting edge' of world property markets, with average property values shooting up by 150 per cent in the last two years. In contrast, the UK's property value increased by 240 per cent over ten years.
A UAE-based developer said, "There's a lot of pent-up capital looking closely at this region, but returns will be whittled away based on escalating costs."
Over the last two years, Dubai has registered rental costs for premium office space more than double, with prices hitting $1,172 per square meter in some cases. In 2005, this figure was about $538.
The main driver behind Dubai's property boom is the ever-growing population, is going to reach 1.9 million in 2010. Low-cost property, costing Dh500 per square foot, is in high demand, but due to increasing costs of materials, investment in is losing its appeal.
A managing director for an international consultancy firm said, "The problem in Dubai is that there are a lot of inexperienced developers, and they are building too much, too quickly and it just can't be sustained."
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