Dubai land department chief says old, new steps to prevent bubble

Dubai Land Department aims for sustainable growth in run-up to Expo 2020

By (Reuters)

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Published: Thu 31 Oct 2013, 10:37 AM

Last updated: Sat 4 Apr 2015, 9:56 AM

Dubai will strictly enforce existing rules and if necessary set new ones to prevent another bubble from forming in its property market, while cracking down on abuses by real estate brokers, the director-general of the emirate’s Land Department said.

“I don’t believe there’s a bubble forming. We are and we will be further regulating the real estate market,” Sultan Butti bin Mejren said at the Reuters Middle East Investment Summit.

As head of the Land Department, which regulates the property market and is involved in planning Dubai’s rapid growth, Sultan Butti is a key figure in efforts to avert another boom-and-bust cycle.

Partly because of inflows of money from elsewhere in the Gulf, Dubai’s housing market is rebounding strongly, with prices up over 20 per cent in the last 12 months, according to analysts. The International Monetary Fund warned in July of the risk of another bubble forming.

“We don’t want a sharp increase in property prices that will exhaust the market. This is not healthy and unnecessary. What we’re trying to maintain is a sustainable growth in the real estate sector over the coming five years.”

The latest official statistics suggest Dubai’s dependence on the real estate market — and therefore its vulnerability to any bubble — had not decreased.

Sultan Butti said real estate transactions in Dubai had totalled Dh195 billion ($53.1 billion) so far this year, up sharply from Dh145 billion in all of 2012.

“The construction and real estate market now contribute to 24 per cent of Dubai’s GDP (gross domestic product), and this percentage will see a slight growth this year.”

But Sultan Butti, who was appointed to his post in 2006, said officials were alert to risks in the property market and taking a range of steps to reduce them.

The UAE central bank on Tuesday set limits on the size of mortgage loans for housing — although the caps were less stringent than originally planned, after commercial banks complained they could hurt business.

Mortgage caps may not have a big impact as many transactions are done with cash, but earlier this month Dubai took a step that will affect those deals too, raising the registration fee for property sales to four per cent of value from two per cent. Sultan Butti said the decision would not be reconsidered.

“It was a wise measure that we took to limit speculation in the market and protect investors,” he said. No further increase in fees is planned or being considered, he added.

Sultan Butti said the Land Department was keeping a tight grip on transactions and preventing deals from going through without proper registration.

“Our focus now is on regulating the real estate brokers. We’re taking various decisions to prevent bilateral deals that are done at the level of brokerage firms without proper registration at the Land Department,” he said.

“These kinds of unregulated and unmonitored transactions may cause bubbles, and that’s why they are forbidden now.”

World Expo 2020

In late November, Dubai will learn whether it has won the right to host the World Expo 2020, which will affect its development plans because of the need to build infrastructure and new hotel space.

Some stock market investors have started speculating that a win for Dubai would push up property prices near the proposed Expo site; if Dubai does not win, that could disappoint investors. But Sultan Butti said the property market would not be hurt in either case.

“We are taking necessary measures to make sure the market will definitely grow in steady steps and the impact will be more tangible if Dubai wins, as it will boost investor confidence and will attract more investors to the country.”

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