Despite a spike in prices for villas and apartment in Dubai over the past 18 months, they remain far lower than their peak five years ago, according to a new report by real estate services firm Asteco in Dubai.

Dubai villa and apartment sale prices have jumped year-on-year by 26 per cent and 42 per cent, respectively, boosted by political stability, a buoyant and diversified economy, regulatory infrastructure and an attractive tax environment, Asteco said.

However, average sale prices for apartments and villas are still 42 per cent lower than in the third quarter of 2008. Although they will increase further, it is unlikely they will hit their peak levels in the short to mid-term, the report said.

Property prices in the emirate plunged by more than 50 per cent in 2009 as the market buckled in the wake of the global financial crisis. The dramatic rebound in the market, however, has left investors wondering whether this new boom cycle is sustainable.  

Earlier this week, Alan Robertson, chief executive officer (CEO) at Jones Lang Lasalle, Middle East and North Africa, told MEED that prices for residential homes in Dubai will return to their peak levels in the next few years.

“I think we will reach the peak levels of 2008 in the next couple of years. That is not inconsistent with other markets around the world,” he said.  

Robertson said 5-10 per cent growth in prices per annum is ideal for the maket. “It’s where they go up 20 per cent for five straight years, and you have GDP [gross domestic product] growth of, say, 4 per cent, that you get a mismatch and it becomes unaffordable. Then you are heading for a big fall,” he said.