Analysts are predicting that prices will rise by at least 10% over the summer months. 'There is a much hotter property market this summer with off-plan buyers queuing overnight. High local inflation and low US interest rates are fuelling the market with negative real interest rates,' said one analyst.
Even if there is a slowdown in transactions this is unlikely to cool prices. Sellers are keeping their property off the market in anticipation of rising prices and therefore creating a shortage that, not surprisingly, produces higher prices.
But the boom can't last forever, according to a leading developer. Mohammed Nimer, chief executive officer of MAG Group Property Development, is predicitng a more sustainable balance between investors and property owners by 2010.
'The construction boom in buildings is about to peak in 2009, with three billion dollars' worth of real estate either on the drawing board or under construction,' he said.
'From there, the value of the market will fall back to 2007 levels of around one billion dollars as more units are delivered. That will hopefully subdue rising market prices.'
At he same time, he pointed out that increasing costs of land, labour and materials, which is unlikely to change in the short term, will keep prices high for the time being.
He believes that actual homeowners currently account for just 30 per cent of the properties sold at launch as real estate sales are still being dominated by short-term investors and not end-users. 'The result is inflated prices, since units are sold-on with a premium numerous times prior to completion,' he said.
'Most projects are still under construction and the next wave of supply will be coming in 2009-2010, which may help bring some stability to the market,” Nimer said.
