Dubai’s residential real estate has not only stabilised, but house prices in the emirate rose an average 2.3 per cent in the final three months of 2011, according to global residential and commercial property consultants Knight Frank.

As per the consultancy’s Global House Price Index (GHPI), the increase in Dubai house prices during the last quarter of 2011 was particularly steep, and ranked on the last quarter’s rise of 2.3 per cent, Dubai stands at No. 12 worldwide in terms of house price appreciation among the 52 destinations worldwide where Knight Frank tracks house prices.

For the whole of last year, Dubai ranked No. 26 as per the GHPI, which tracks the performance of mainstream house prices wprldwide. Dubai house prices rose just 0.5 per cent for the entire year 2011, suggesting that they declined in the initial months of the year, and were more than countered by the last quarter surge.

Knight Frank’s rankings are supported by real-time asking prices on popular local websites where property is advertised, with asking prices going up in many well established and maintained locations in Dubai.

According to real estate investment and advisory firm Jones Lang LaSalle (JLL), Dubai’s property market is maturing and showing signs of polarisation, with differing prospects in 2012 for property based on location, quality and management.

“2011 was a difficult year for real estate investors with most sectors of the market moving in the favour of tenants, with lower prices and rentals.

While these trends appear likely to continue into 2012, the main trend for this year is likely to be an increasing polarisation within each sector of the market,” said Alan Robertson, CEO, JLL MENA, in a recent report on the UAE’s property market trends.

“As the performance of the best quality projects will improve, average prices are expected to decline further in 2012 within this increasingly two tier market,” he said. “Beyond investment valuations and rentals, we are continuing to see the evolution of a more mature marketplace in the UAE where valuations and property and asset management are becoming increasingly important for occupiers, developers and investors,” Robertson added.

“The local real estate market will continue be impacted by regional and global events during 2012 as, the UAE is not immune from the on-going impact of the Arab Spring and the economic troubles of the Eurozone. As we enter 2012, the real estate sector will inevitably be susceptible to any potential geo-political changes within the region, with the recent escalation of rhetoric between Iran and the West being the major cause of uncertainty. The worsening European debt crises and its impact on the global economy will be the other major external challenge to the UAE real estate market in 2012,” he said.

According to Knight Frank analyst Kate Everett Allen, “In the final quarter of 2011, prices fell in 60 per cent of the countries covered by the index.”

New entrant Brazil tops Knight Frank’s GHPI for 2011, with house prices rising 26.3 per cent in 2011. “Away from Europe and Asia, Brazil, a new addition to the index this quarter, tops the rankings with 26 per cent price growth in 2011,” said Kate. “This remarkable performance is being fuelled by strong population growth, rising household wealth and an expanding mortgage market,” she added.

An unsettled Europe formed the bottom of the housing market pyramid in 2011, with still-declining house prices in many of the European markets. “Unsurprisingly, all 12 of the bottom rankings are occupied by European markets with Ireland, down 17 per cent, in last place. However, not all European markets are in a moribund state,” said Kate.

“Estonia, Slovenia, Iceland, Norway, Switzerland and Germany achieved annual growth over 5 per cent, despite the precarious state of the Eurozone’s sovereign debt crisis,” she pointed out.

“A combination of global economic uncertainty, weak consumer confidence and strict mortgage lending criteria are dampening growth in Europe and North America while stringent government cooling measures in Asia Pacific are successfully curtailing house price inflation there,” she said.

“Asia’s downturn has proved highly influential. In 2007 China, Hong Kong and Singapore saw price rises of 42, 21 and 33 per cent, respectively. Last year, growth was -2, 11 and 5 per cent,” she elaborated.

“What the index makes clear is that the performance of global housing markets is far from uniform. While there is some cause for localised optimism, the overall trend for 2012 at least is unlikely to be positive.”