Do Dubai property prices face a bubble risk? Here is what the Swiss bank says

Dubai property is not facing a bubble risk as prices are fairly valued despite a strong rally after the pandemic.

According to UBS Global Real Estate Bubble Index 2023, the housing market of Dubai is fairly valued, even though its reputation as a geopolitical safe haven has recently triggered a surge in demand for both renting and buying.

Property prices in Dubai witnessed the highest growth among all the major cities in the past four quarters, the Swiss bank said, adding that prices will remain strong in the coming months as the “red-hot rental market” is offering strong returns to investors and landlords.

For the study, UBS analysed residential property prices in 25 major cities around the world.

Property prices in the emirate rose at the fastest rate in the year to June 30 in almost a decade, rising by nearly 17 per cent. While rents increased even at a faster pace of 22.6 per cent, according to global real estate consultancy CBRE.

Interest in local property market has grown massively after the government successfully handled the pandemic, attracting high net worth individuals from across the globe.

“In Dubai, real housing prices continued to increase at a double-digit rate. Given strong income growth and a red-hot rental market, with rental growth even surpassing owner-occupied price growth, we see the market as fairly valued,” the Swiss bank said.

“While Dubai is highly cyclical and prone to overdevelopment, price momentum should remain strong in the coming quarters,” it added.

The Swiss bank stated that Zurich and Tokyo remain in the housing bubble risk category, hence, investors should be very cautious when pumping their money into the two markets.

It added that Toronto, Frankfurt, Munich, Hong Kong, Vancouver, Amsterdam, and Tel Aviv – which were formerly in the bubble risk zone – are now all in the overvalued territory.

It said in some cities, the seeds for the next property price boom have already been sown.

“Hybrid working has not weakened demand for city living in a sustained manner and the housing shortage will likely intensify as fewer building permits have been issued recently – most notably in European urban centres,” it said.