The Dubai real estate market, where housing prices have continued to increase by double-digit rates, remains fairly valued, and its price momentum should remain strong in the coming quarters, according to UBS’s Global Real Estate Bubble Index for 2023.

The investment bank said real house prices in the emirate have continued to rise at a double-digit rate.

“Given strong income growth and a red-hot rental market, with rental growth even surpassing owner-occupied price growth, we see the market as fairly valued,” the bank said.

“While Dubai is highly cyclical and prone to overdevelopment, price momentum should remain strong in the coming quarters.”

Of 25 cities surveyed by UBS globally, Dubai was one of nine where house prices are fair-valued, the bank said.

Only Zurich and Tokyo are at risk of a housing bubble, while the remaining 14 cities are considered by UBS to have overvalued house prices.

San Francisco, New York, Boston, Sao Paulo, Madrid, Milan, Warsaw and Singapore are the other cities that have homes that are “fair-valued” according to the bank.

UBS said from mid-2022 to mid-2023, real house prices in the cities surveyed fell by 5% on average and that more downside on prices is likely.

The global surge in inflation over the last two years had led to a sharp decline in imbalances in the housing markets of global financial centres on average, the bank said.

Claudio Saputelli, head of real estate at UBS Global Wealth Management’s Chief Investment Office, said: “In inflation-adjusted terms, prices are actually 5% lower now than in mid-2022.

“On average the cities lost most of the real price gains made during the pandemic and are now close to mid-2020 levels again.”

(Reporting by Imogen Lillywhite; editing by Seban Scaria)