Prices for residential homes in Dubai’s real estate market will return to their peak levels of five years ago, according to Alan Robertson, chief executive officer at Jones Lang LaSalle, Middle East and North Africa.

“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.  

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.  

“People ask me if we are heading for another bust. The answer is we don’t know yet. On one hand there are danger signals of rapid price escalation, but on the other hand there are key differences this time around,” he said.

“I’d like to think we will see moderate controlled growth. If prices go up 5-10 per cent per annum, that is pretty healthy for everyone in the marketplace. 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.”

Robertson says the market is showing signs of having learned lessons from the past, in that the projects now being rolled out are generally fairly modest in scale compared with the schemes in 2007-08, and are better matched to demand levels.

Increasing government intervention is also raising confidence in the market. “Boosting the transfer tax from 2-4 per cent is bound to take some steam out of the market, especially for the flippers. [When you consider] your purchase costs, plus the new tax, that means you’ve got to earn 7-8 per cent just to get your money back. So if you are someone who plans to sell in six months, you might think again,” he said.