IMF warns Dubai against another property bubble
Measures can be taken to avoid the mistakes that led to the property bubble of 2008, IMF says
The IMF has cautioned investors in Dubai against over-optimism regarding its property market boom as prices and expectations rise in the city.
Speaking at a news conference, Masood Ahmed, IMF’s director for the MENA region said, “when you begin to see very rapid increases in any asset prices then you just need to be prepared to act.
“The government of Dubai is already beginning to act,” he added.
According to a Reuters report, Ahmed added that measures can be taken to avoid the mistakes that led to the property bubble of 2008 that almost brought state-run companies to a halt.
“Singapore has a one-time tax of 15% if you resold the property within six months,” he said, adding, “So there are instruments that can be done (used). Going forward, just make sure that fundamentals continue to drive it, do not let yourself be overtaken by a degree of exuberance.”
UAE’s property market has been on a high since developers began launching new projects last year, following the debt crisis of 2009, and this bullishness was also proved by the popular success of Cityscape Global 2013, recently held in Dubai.
Concerns regarding the need for a coordinated plan by state-linked property developers continue to linger, though.
“That’s what we have lacked in the run-up to 2008,” said Farouk Soussa, Citigroup’s chief economist for the region at the same event. “There was too much competition between the big state developers and that’s what I fear we are running into again,” he said.
Earlier this year, authorities from the Dubai government had informed they would double the registration fee charged on real estate transactions to 4% as a move to curb excessive speculation.
