(MENAFN - Arab News) The recent economic slowdown in China is having a profound impact in many of its sectors.
The property market in China which has been showing clear signs of cooling down in recent months is one of those in which the slowdown is expected to be more intense. Price growth peaked late last year reaching a yearly rate of 9.9 percent and has been trending down ever since.
In fact the month-on-month growth rate has been negative since May reaching monthly declines of nearly a full percentage point.
Second-hand house prices contributed the most to the moderation of property prices failing to grow in 19 out of the 70 most prominent cities in China.
Chinese authorities have been trying to moderate overheated real estate prices while meeting the large demand arising from urbanization.
A heterogeneous set of measures such as a tax on capital gains ownership restrictions for residents and mortgage rate hikes have already had a noticeable impact on the market.
Additional construction projects at affordable prices are also adding downward pressure to property market and they are expected to meet the large demand.
The government's recent success taming the real estate prices along with the increased level of affordable housing projects indicates that housing inflation may remain low in the medium term.
In Dubai the property market is at a different stage.
The global financial crisis had a major impact on Dubai's housing market causing a sharp correction in prices that continued for three years.
In the beginning of 2012 property prices started witnessing an accelerating growth rate.
Among other factors large money inflows seeking refuge from the regional instability elevated the economic growth rate of the Emirate and contributed to housing inflation.
Taking the pace of construction s a gauge for the real estate market there are no signs of cooling down.
The number of residential units built in Dubai is expected to grow at an annual rate of 6.6 percent this year according to Jones Lang LaSalle (JLL) projections in comparison to an annual growth rate of about 3 percent in the last two years.
Offices and retail property have also been registering large increases in both prices and stocks and according to JLL figures their vacancy rates have been declining despite the increase in supply. Dubai's real estate market is currently expanding across all types of property.
As history shows the emirate's property market is susceptible to overheating risks.
Memories of the last bubble which burst in 2008 are still fresh and the accelerating prices are already above pre-crisis levels.
Fundamental factors indicate that prices should be increasing in the emirate however it is not clear to what extent the current growth rate of prices is sustainable.
With the aim to ease inflationary pressures UAE policymakers already introduced measures such as taxes on property transactions at 4 percent of the price.
Although the tax rate is far below those found in Hong Kong and Singapore economies that suffered from overheated real estate markets its mere implementation signals authorities are aware of potential risks and may be ready to intervene in advance.
Both real estate markets share similar demand pressures which are expected to persist. However their outlooks are different.
While Chinese policies have already shown effectiveness the effect of the recent measures introduced in Dubai is still uncertain and economic characteristics of Dubai anticipate housing inflation moderation will be a challenging task.
Prepared by Jordi Rof economist at Asiya Investments aninvestmentfirminvesting in EmergingAsia A A