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 speculative profits.
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."