Dubai to Restrict Home Flipping, Prevent Bubble

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Dubai home values increased more than 30 percent last year, stirring concerns of a bubble burst repeat. 

Taking a proactive stance, Dubai is planning to implement new rules to control speculation on properties sold before they are built, Sultan Bin Mejren, Land Department general director, told Bloomberg. 

During the first quarter, the department plans to review "off-plan" transactions, and possibly introduce new regulations in quarters two and three, Bin Mejren told the news service.

"Transactions on off-plan properties are a little dangerous," he said. "We are now studying them and looking at ways to ensure that they don't hurt the market."

Dubai's property market is recovering from the real estate bubble burst in 2008 that caused values to fall by as much as 65 percent. The property market crash was due in large part to the buying and reselling of off-plan properties, also known as flipping, to make quick profits. 

Since then, the market has bounced back, posting the world's largest gain in luxury property prices in 2013, according to consulting firm Cluttons. The firm expects Dubai to lead again in 2014. 

Leading Dubai developer Nakheel announced yesterday it is repaying $1 billion in debt ahead of schedule, citing a strong financial performance in 2013. 

Last month, a Cluttons report showed values in Burj Khalifa, the world's tallest building, increased by 13.6 percent since 2010. 

However, measures should be taken to prevent another housing bubble, analysts say. 

Last December, developer Emaar Properties announced a ban on real estate agents from flipping homes before construction, in an effort to create stability. 

Market regulators have also taken action to cool the market. Last year the Land Department increased the transaction fee to four percent from two percent, while the United Arab Emirates Central Bank introduced restrictions on mortgages for foreign buyers. 

"Don't look at buying property as though you're buying shares on the stock market," Bin Mejren told Bloomberg. "If you buy a property here, hold on to it, because by 2020 the city will be entirely different from what it's today."