Dubai’s real estate market the second most expensive in the world

Continued housing supply shortages and unprecedented price hikes in 2008 will make Dubai’s real estate market the second most expensive in the world, after the West End of London, according to analysts.

“Accelerating growth rates have equipped expatriates with the means to rent houses at high rates, and the situation is least likely to be resolved in 2008 as the market is expected to be in short supply of housing units”, HC Securities Brokerage said in its Economy Watch Bulletin.

Government caps had done little to address surging inflation caused by rapidly increasing rents across the region, the report said, with GCC rents forecast to increase by a further 20% this year.
Dubai rents were first capped at 15% in 2006, with the rate lowered to 5% in December. The rent cap in Abu Dhabi is currently 7%, and 15% in Ras Al Khaimah and Fujairah.

“Nevertheless, the rise in rent rates is backfiring greatly on the inflation rate” the report said, adding “if the main reason behind climbing inflation is skyrocketing rent rates, we note that limiting rent prices does not seem to have solved the problem”.