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Dubai: Real estate speculators need to be rooted out of Dubai's housing market, and introducing a 50 per cent capital gains tax on properties bought and sold within a period of 12 months could be the best way to discourage short-term speculators, Standard Chartered Bank said yesterday.
Curbs against speculators will reduce house prices and improve the stability of the market, the bank noted in a research paper.
"It is a hot topic and having a huge impact on the economy. We need to get speculators out of the market," said Marios Mara-theftis, the bank's regional head of research for Middle East, North Africa and Pakistan.
He said there are "worrying signs" of speculative activity in Dubai's real estate market, which is "destabilising, dangerous and unsustainable." He said speculation in Dubai has reached "excessive levels."
The introduction of a capital gains tax would encourage long-term investors and end-users to buy property, he said.
The bank's report said that due to the increasing population, 44,000 housing units have to be released on to the market each year in order to keep up with demand.
The report also shows there is a premium of Dh1,950 per square foot for villas and for apartments, the price increases around Dh70 per square foot the higher the floor.
There are also significant premiums for the Palm Jumeirah at Dh1,110 per square foot and Burj Dubai at Dh3,965.
Standard Chartered had forecast back in March that there would be a 15 per cent premium in 2008 in the housing market.
"Well, it wasn't 15 per cent in one year, it was 42 per cent in three months," Maratheftis said. He said it is the short-term investors, looking to make money, who are hurting the market.
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