IMF Official Warns of Dubai Property Bubble

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A top Middle East official for the International Monetary Fund warned this week that Dubai may be in danger of another property crisis unless it imposes measures to regulate development.

"It's important from looking at the stock of real estate that is coming on to the market to be careful to ensure measures are in place to moderate the pace of growth to avoid any risk of the boom and bust cycle," Masood Ahmed, the head of the IMF's Middle East and Central Asia department, told reporters.

After dropping more than 50 percent post-2008, Dubai home prices have been rebounding lately, with new villa projects drawing long lines of buyers. In some areas prices are up as much as 20 percent from a year ago.

But some analysts have expressed concerns that the much-heralded recovery is isolated to certain neighborhoods and only the top quality product, while other markets languish. The increased activity has also been linked primarily to investors, rather than end-users.

At the same time, Dubai has been proposing several new large scale projects, reminiscent of the pre-bust days. One recently announced project, Mohammed bin Rashid City, calls for the 1,500 villas, the world's biggest shopping mall and more than 100 hotels.

"There's also some big projects being proposed in Dubai and we think these need to be done in a way that minimize any financial risk for the government-related entities, particularly any financial liability for the sovereign," Mr. Ahmed said, according to The National.

Mr. Ahmed told reporters he was not concerned about Dubai's debt issues. Many of the government-related entities have "quite successfully" restructured debt, he said.

But he also warned that the emirate must move forward carefully.

"Nevertheless, debt levels in Dubai are still quite high," he said. "They're about 100 per cent of GDP and substantial amount of debt rollover coming due in the next few years including some of the debt restructured in 2009 and so our view is that's important to deal with these issues proactively."