Investors 'flipping' Dubai properties a worrying sign, brokers warn

As Dubai house prices rocket once again, estate agents are reporting a return of property speculators buying off-plan to sell at profit within a short period of time.

Dubai brokers highlighted the demand for Emaar’s latest launch last month which saw investors queuing to pay deposits, saying they have known people how have already been flipping off plan property foShow more

Speculators are returning to the Dubai property market in what brokers warn could be a worrying sign for a market enjoying a fragile recovery.

Agents say investors are again engaging in "flipping" - the practice of buying a property off-plan to sell at profit within a short period of time. The practice was widely blamed for stoking house inflation which led to the collapse of house prices in 2008.

Dubai property prices are rising in some locations in the emirate. A Reidin index of villa prices based on both advertised and actual sales prices gained 1.5 per cent during September and by some 15.4 per cent when compared to a year earlier.

"We have hard evidence that property is literally changing hands and going straight back on the market as soon as the ownership is transferred by the Land Department," Mario Volpi, head of residential sales and leasing at Cluttons Dubai office told The National. "We think this could be quite a worrying sign if it continues. We don't want things to return to the monthly double digit property inflation we saw during the last boom."

According to Reidin, which bases its Dubai index 50 per cent on data its received from the Dubai Land Department and 50 per cent on property listings, villas in Dubai showed the biggest price increases, registering a 1.9 per cent monthly increase and a massive 22.9 per cent yearly rise.

Apartment sales during the month rose 1.3 per cent according to the company and 5.7 per cent over the year.

Large apartments, measuring between 101 and 150 square meters saw the highest rise at 2.08 per cent while those in the highest size category of more than 151 square meters rose by an average 1.93 per cent. Flats which measured between 51 and 100 square meters rose in value by an average of 1.93 per cent during the month, while those of 50 square meters or less rose in value by an average of 1.57 per cent.

"A few months ago there were no properties being flipped. Now we're noticing people buying properties at one price and immediately selling them again, making Dh50,000 to Dh100,000 plus on a studio or a one bedroom flat - more on bigger properties," added Mr Volpi.

Other Dubai brokers highlighted demand for Emaar's latest launch which saw investors queuing to pay deposits.

"We have known of people flipping off plan property such as the recently sold Emaar serviced apartments for a premium of around 7 per cent to 10 per cent," said Jackie Johns, managing partner at Dubai Luxury Homes. "And for existing properties we are seeing people selling after relatively short periods of time - often between six months and a year - to make a profit. We had one client who bought in Victory Heights by the golf course who made 25 per cent on his investment in one year. That's the sort of thing we haven't seen in a long time."

During the height of the market in 2008 investors bought and sold off-plan properties in Dubai at frenetic pace, often holding them for just weeks before selling them on to other eager investors. The practice helped drive prices up by more than 40 per cent in the first quarter of that year alone

"Until just a few weeks ago the off plan market in Dubai was dead," said Ryan Mahoney, chief executive officer at Dubai-based Better Homes. "We've been amazed at how quickly across the market that attitude has changed. Now we are seeing some people making 30 per cent gains over a three-month period by buying and selling off plan properties again."

Rents in Dubai are also rising according to Reidin, gaining 0.39 per cent during September and equating to 5.59 per cent over the year.