British buyers pile into Dubai as prices slide

British investors are piling back into Dubai’s property market in search of a bargain despite experts warning that it is beginning to cool.

Memories of the emirate’s real estate bubble bursting in 2009, exposing its debt-laden economy, have started to fade with UK buyers sinking almost £1bn into the area between January and June – a 44pc jump on 2013.

British nationals were the second most significant property investor behind the Indians, who upped their levels of investment by 31pc to £1.75bn, and just ahead of Pakistani buyers who spent 50pc more at £750m.

But despite a slew of forthcoming high-profile projects such as a new golf course from US tycoon Donald Trump, and a pipeline of luxury developments, the rate of growth is slowing, with confidence also knocked by this month's stock market crash.

After a 51pc house-price rise in 2013 the Federal Government imposed stricter borrowing rules and doubled property registration fees to allay the fears expressed by the International Monetary Fund of a potential Dubai property bubble, dampening growth.

Average sale prices grew by 6pc in Q2, down from 10pc in the previous quarter, the report showed, coinciding with a huge slug of investment from the UK.

“Certainly, growth on the magnitude recorded last year was unsustainable and always in danger of petering out,” said Faisal Durrani, an analyst at Cluttons.

Oversupply is also cooling the market with 372,000 units under construction this year, up from 342,000 in 2011, according to the property group, with luxury homes such as a £2.8m four-bedroom villa on the world’s largest man-made island, off-Dubai, Palm Jumeirah.

“With signs of reduced sales activity – particularly in the secondary villa market – it is likely that asking prices in this sector will decline further in the coming months,” Alan Roberston, chief executive of the Middle East practice at JLL.

Sales volumes have declined in all sectors recently, as data from the Dubai Land Department showed villa sales in May 2014 down by almost 50pc on the same month in 2013.

“The upper end of the villa market has been hit particularly hard with transactions volumes dipping sharply this year,” said Mr Durrani.

However, slowing house price growth has not muted the construction industry in Dubai with contracts for residential building work worth $5.4bn awarded in the first half of the year.

Major infrastructure projects such as the Eithad Rail, the Dubai Tram and Al Maktoum International Airport, should continue to attract property investors, Mr Durrani added.