Moment of truth as Dubai property bubble looms
Property prices have soared on the back of Dubai's economic boom, risking a market rise that would reach unsustainable levels
"Keep calm. There's no bubble", proclaimed a giant poster on a 40-storey building overlooking a Dubai highway, advertising a property finding portal late last year. That may have been true at the time, but the risks are rising.
A leap in bank lending to the construction industry indicates financial institutions have resumed pouring money into real estate projects in the last few months, after cutting back sharply in the wake of Dubai's 2008 crash.
At the same time, property prices have been soaring on the back of Dubai's economic boom, increasing the chance of the market rising to unsustainable levels.
Surging supply and unsustainable demand are a risky mix - the same combination that got Dubai into trouble six years ago, forcing state firms to reschedule tens of billions of dollars of debt and jolting financial markets around the world.
This time, authorities say they are aware of the dangers, and they have taken regulatory steps to slow demand growth. But the steps are still modest compared to those by other global cities facing the same problem, such as Hong Kong and Singapore.
"It's too early to be calling top, but credit growth of that pace tells you that the cycle is accelerating rapidly," said Simon Williams, HSBC's chief economist for the region.
"Such a huge increase in lending is simply not consistent with economic order and stable asset prices. The time for policy action is now, before bubbles really get going, not when they are already in place."