(Refiles to fix typo in par 11)
By Martin Dokoupil
DUBAI May 6 Dubai may need stronger measures to
counter property speculation in the emirate, a senior
International Monetary Fund official said on Tuesday as it
warned again about a potential real estate bubble.
Growth in the Gulf emirate, the region's trade and business
hub, picked up strongly last year as the government committed to
real estate projects worth tens of billions of dollars following
a property market crash in 2008-2010.
Masood Ahmed, director of the IMF's Middle East and Central
Asia department, said the Fund had welcomed moves last autumn by
Dubai's government and central bank to cool what could become a
"speculative increase" but that more was needed.
"Our own view is that these measures are good but if you
look at what's happening in the market it's time to consider
stronger measures," Ahmed said in a presentation on the regional
economic outlook. "Particularly in terms of ways to discourage
quick turnaround - what people refer to as flipping of real
estate in Dubai."
A strong rebound in the Dubai property market over the last
year has brought a resurgence in "flipping", where investors buy
and sell mostly unbuilt properties in quick succession to make
Dubai, one of seven United Arab Emirates, said in September
it would double a registration fee charged on real estate
transactions to 4 percent to prevent excessive speculation.
In October, the UAE central bank imposed limits on mortgage
loans but the restrictions were not as stringent as first
planned after lobbying by the banking industry.
Property prices in Dubai, known for ambitious projects such
as the world's tallest tower and man-made palm-shaped islands
plunged more than 50 percent between 2008 and 2010 after a
speculative bubble burst, pushing the emirate close to default.
Ahmed mentioned Hong Kong and Singapore as examples for what
Dubai could consider doing: "In the case of Hong Kong, they
imposed a 15 percent fee on transactions of real estate that
were turned around (re-sold) within six months."
"In the case of Singapore, for certain types of real estate
that were turned around within a year the fee was 30 percent."
The value of real estate transactions in Dubai jumped 53
percent last year, to more than 236 billion dirhams ($64.3
billion). Selling prices for residential property rose by about
a third in the first three months of 2014 compared with a year
before, prompting the IMF to warn of a possible bubble.
"In terms of macroprudential measures, it is time to be
vigilant," Ahmed said. "But perhaps if it turns out that there
is a big increase in lending to real estate - so far it is
mostly a cash market - there would be the time to look at the
additional measures for macroprudential as well."
Deputy Central Bank Governor Mohammed Ali al-Falasi, who
attended the IMF presentation, declined to comment when asked by
Reuters if the central bank was considering taking any action.
Dubai's economy is expected to grow by about 5 percent this
year, a similar pace to 2013.
Dubai accounts for a quarter of the total output of the
UAE's economy. Oil-powered Abu Dhabi is responsible for around
65 percent of the federation's output.
The UAE, one of the world's top oil exporters, has yet to
release 2013 GDP data. Analysts polled by Reuters in January
expected 4.3 percent growth in both 2013 and 2014.
Ahmed said the IMF was likely to raise its current 2014
growth forecast of 4.4 percent for the UAE given strong growth
in the non-oil sector, particularly in Dubai.
Business activity growth in the UAE non-oil private sector
rose to a record high in April, data showed on Tuesday, while
2013 saw double-digit growth in both tourist numbers and the
number of new trade licences.
Mohamed Lahouel, chief economist at the Dubai Department of
Economic Development agreed with the IMF's view on property.
"It's certainly speculation that is going on in the real
estate market today. What worries me is that ... it's human
greed that's driving that," he said at the same event.
"It's very important for Dubai to worry about the impact of
speculative demand. It may speed up economic activity for four
or five years and then we end up suffering."
(Editing by Catherine Evans)