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Another ‘world’s tallest tower’ planned for Dubai…but are we in a bubble?

Some hot global property markets may be showing signs of cooling off, but that hasn't dissuaded Dubai's Emaar Properties. This week, the company launched a stunning showcase of its latest luxury project at upmarket London department store Harrods.

The event comes amid tough times for the city state's property market. Real estate services company, Jones Lang LaSalle (JLL), claims villa and apartment prices have fallen by 11 percent and 10 percent respectively in the past year, with hotel rates also heading south.

Emaar's project will feature what is set to be the world's tallest tower, taking the title from its own existing Burj Khalifa construct in Dubai, which rises to 828 meters. Emaar's reign may be challenged however: Saudi Arabia's Jeddah Tower, scheduled for completion in 2018, aspires to snatch the title.

So is another towering trophy asset really what the city needs?

Some argue this is what makes Dubai what it is. It has successfully carved a niche for itself as the Middle East's accessible hub both for vacationers looking to indulge in glitzy leisure activities and for businesses seeking a regional entry point. Landmarks such as these are perhaps essential physical representations of that status.

Michael Calatrava, an architect and also son of the project's architect Santiago Calatrava, argued that the new Tower is a critical "beacon" helping the city state reinforce its unique role in the world: "Dubai attempts to be the centerpoint between Asia and North Africa, Australia and Europe and creating these beacons really drives that," he told CNBC.

From a value perspective, marketers say prices for the new apartments start at over seven-times less per square foot than in prime central London. And with data over the past two years showing the steam finally starting to come out of this corner of the London market after the past decade's boom, few industry experts are advocating this as the time to pile in. Estate agent Savills also this week reported prime central London prices were down nearly 7 percent from the 2014 peak.

Chairman of Dubai Emaar property Mohamed al-abbar gestures as he speaks to press in Dubai, March 10, 2016. Alabbar said that Emaar, the developer of the world's tallest tower plans to build even a taller tower in this rich Gulf Emirates.
MARWAN NAAMANI | AFP | Getty Images
Chairman of Dubai Emaar property Mohamed al-abbar gestures as he speaks to press in Dubai, March 10, 2016. Alabbar said that Emaar, the developer of the world's tallest tower plans to build even a taller tower in this rich Gulf Emirates.

From other viewpoints, Dubai may also look relatively attractive.

As Simon Barry, head of new developments at Harrods Estates puts it, "People we're talking to feel Dubai is somewhere they're going to be welcome as private investors, as potential residents, as a place to base themselves. And it's perhaps true that's not something you can say of other countries right now which are perhaps seeing property as a target for raising tax."

With a raft of recent changes and proposals including an additional 3 percent stamp duty on second homes and unfavorable adjustments to mortgage interest and depreciation policies, the U.K. government has clearly signaled it is trying to deflate the capital's rampant house price inflation. Furthermore, as the government works hard to increase transparency over property ownership, many may be justified in starting to feel less welcome.

But does a Dubai property investment make sense in itself? In a recent note, Standard & Poor's said it expects UAE (United Arab Emirates) real estate prices to continue sliding in 2016. The credit rating agency highlighted the triple factors of lower oil, a stronger dollar and geopolitical tensions as pressures hitting real estate which it said are unlikely to abate in the short term.

Yet Simon Barry remains sanguine about Dubai's prospects, saying a longer time horizon is essential: "The real goal is to anticipate the next 20 years. Dubai will emerge as a center in the Middle East which is a part of the world that's going to grow very strongly over the next 20 years and presumably outperform the growth rates we're going to see in Europe."

JLL's Head of MENA Research, Craig Plumb, agrees, saying: "There remains some appetite for high-end of luxury apartment projects and Emaar are one of the most respected and trusted developers. We remain confident about the long term prospects for the Dubai market."

And Dubai's developers will be hoping that appetite keeps growing as there's likely much more to come. According to Matthew Tribe, director at CallisonRTKL, which designed the masterplan: "Dubai has a visionary leader. And he always quotes that he's only developed 10 percent of his vision."