Dubai residential and office property markets will continue to soar due to lack of supply

Property prices in Dubai are expected to continue soaring next year, but not at the same rate as in the last 12 months, according to analysts.

The latest property price survey shows that both residential and commercial real estate in Dubai continues to defy global trends.

In 16 major investment zones, the price of villas skyrocketed 76% in the year to last month. Offices were close behind, rising 74% during the same period, while apartments increased 63%, the survey conducted by banks, consultants and real estate companies and organised by The National newspaper found.

Next year will see some correction in prices, it is predicted. 'We are expecting a maximum 35% increase next year, although you may find a higher increase in some areas,' said Sajeer Babu, a property analyst at the National Bank of Abu Dhabi.

Vincent Easton, the head of sales at Sherwoods property agency, agreed that any increases would be smaller. 'Increases over 70% in a year are not sustainable,' he said. 'But there is currently a strong demand for villas because there are not many coming into the market. You are entering in a supply and demand situation,' he added.

Billy Rautenbach, the head of sales at Better Homes, said it could become a problem. 'Dubai Marina, for example, has such little stock that villas are not changing hands. People are not trading them but living there. They are not coming out to the market,' he confirmed.

The survey also found that once a project had been delivered, prices still increased each month, but at a slower pace. For example, the cost of villas at Arabian Ranches rose 3% while villas and apartments at Dubai Marina increased 2%.

Office prices have increased faster than apartments over the past year, with record highs in Downtown Burj Dubai and Tecom. 'There is an interest in terms of coming-close-to-completion offices because there is also an acute shortage of ready available commercial office space,' Mr Easton said.

Also more multinational companies are establishing regional offices in Dubai because of its strategic location and strong economic performance, according to Aurore Maupou, the director of Dubai property sales at Hamptons International.

In a separate report, EFG-Hermes estimates Dubai residential property prices have jumped 14.4% so far this year, against expectations of a 5% to 10% rise for 2008.