Key question for Cityscape 2013: Is Dubai again moving into a bubble?

No show better reflects the mood of an industry than Cityscape.

The annual property industry gathering is the ultimate barometer of confidence in Dubai bricks and mortar.

For the first time in five years there is a palpable sense of a recovery in the market. That is why this year’s event promises to be so fascinating.

The signs may have been there last year. But the evidence can be seen in the double-digit gains of recent months.

Dubai has led worldwide property prices this year.

Significantly, apartment rates have outpaced villas for the first time – rising by about 42 per cent year to date, according to Asteco data.

Villas gained 26 per cent over the same period.

But forget the broker data and analyst reports for a moment.

A tour of the halls of the Dubai International Convention and Exhibition Centre tells you much of what you need to know about where we are in the current development cycle.

There are almost 30 per cent more exhibitors at this year’s show than there were at last year’s.

While its organisers and exhibitors will be happy with that increase, other market-watchers who remember the property crash of five years ago may find it unsettling.

The key question for Cityscape 2013 is obvious. Are we again moving into a bubble?

A major factor is whether the market has reached a sufficient level of maturity with enough end users to permit moderate and sustainable gains and losses without the pendulum of speculation exaggerating those peaks and troughs.

Much has changed since the collapse of prices in late 2008, when the global financial crisis and a local speculative bubble combined to produce a perfect property storm.

Governments worldwide have sought to spur growth by keeping interest rates low while quantitative easing has increased liquidity.

That has encouraged some investors to take on more risk in the hunt for returns.

Property in cities such as Dubai may be perceived as attractive from that perspective.

The Arab Spring has also led to a flood of human and financial capital into the city, with many brokers reporting a sharp increase in regional cash buyers over the past two years.

Together with other arrivals from elsewhere in the world, helped in some cases by the malaise in their home economies, there are now more people looking to buy a property for the traditional reason – to live in it. Five years ago, such buyers were more of a rarity.

But ranged against these drivers of local property appreciation are other compelling reasons to deter more cautious investors.

Apart from the seemingly unsustainable price appreciation of the last year and the speculative fears that evokes, the possible introduction of mortgage caps and other regulatory intervention could be a red flag for some investors weighing entering the market.

Finally the high interest rates still being charged by some banks at a time when interbank borrowing costs have dipped to historic lows is another cause for concern.

Over the next three days, the halls of Cityscape will provide a colourful backdrop to this debate.

Enjoy the show.

scronin@thenational.ae