House prices in Dubai increased by nearly a third during the first half of the year as more residents looked to buy a home rather than put up with surging rents.
According to a new report by the property broker Cluttons set to be published today average property values in the emirate rose 30.6 per cent between January and June this year while average rents rose 11.3 per cent.
The increases mean that property values are now 36.9 per cent higher than they were at their 2009 market low.
The Dubai property market has drawn capital from around the region over the past two years as investors affected by regional upheaval sought so called safe haven investments.
Better availability of mortgage finance has also encouraged more residents to buy property.
The agent said capital values in some residential submarkets were quickly closing in on their 2008 pre-crisis peaks.
Apartments showed the biggest price increases, rising by an average of 25.1 per cent during the three months to the end of June alone - almost double the increases recorded during the same period last year when they climbed 13.4 per cent.
Villa prices rose by an average of 21 per cent - slightly less than Cluttons recorded during the same period last year when they rose by 24.4 per cent.
Cluttons described the rapid price increases in the city as "less concerning than in 2008, given the increased number of end-users in the market".
Overall, however, the agent said that values remained 31.1 per cent below the previous peak following price falls of 49.7 per cent after of the global financial downturn.
Average rents in neighbouring Sharjah rose by an average of 7.1 per cent during the three months to the end of June as Dubai workers unable to afford soaring rents relocated further afield.
Cluttons said that it was seeing an increase in domestic demand for home buying, fuelled in part by favourable lending rates and by tenants attempting to avoid soaring rental costs by purchasing a home.
It added that it was also observing continuing demand from investors seeking a safe haven for their cash from the Arab Spring.
"The resounding success of Dubai residential so far this year should not come as a surprise given the magnitude of the correction recorded during the bottom of the market, said Steve Morgan, the head of Cluttons in the Middle East.
"We are still far off the previous peak, when growth was far more unsustainable.
"The acceleration in residential capital values this year has been underpinned by robust levels of job creation and a rising population, rather than being fuelled by 'fly-buy' dealers, as was the case in the past."