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Is Dubai's property market still too hot?

If you wanted to make a quick buck in property, Dubai would have been the place to do it in the last couple of years. And the desert of superlatives is still going strong despite a partial slowdown.

According to CBRE Group, apartment prices increased by a more modest 3.2 percent in the second quarter of 2014, bringing gains over the last year to 21 percent. But that's exactly the problem.

Memories of the last real estate bubble that blew up in 2009 and exposed a debt-laden Emirate are still fresh.

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"In our view, the residential market is getting close to the top and we would perhaps expect growth for another 12-18 months, but certainly not at the rate we've been seeing. It's been unsustainable," Craig Plumb, Head of Research, MENA, at Jones Lang LaSalle (JLL), told CNBC.

The government has moved to cool the rally, doubling transaction fees to four percent and introducing revised caps on mortgages at the end of last year. Still, the International Monetary Fund (IMF) has warned repeatedly over the summer that more measures are needed to avoid a replay of the previous disaster.

"The threat of another period of anomalous growth as we saw in 2007-08 was curbed through the effective combination of government backed legislation and general affordability has helped to rein in growth. This is reflected in the falling number of transactions, particularly at the top end of the villa market," Steve Morgan, Chief Executive at Cluttons Middle East, explained to CNBC.

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Some of Dubai's biggest developers have also moved on their own to ban real estate brokers from reselling off-plan properties before handover.

Plum agreed further policy action was warranted. "Yes, they've done more than they did last time. Whether they have done enough? There is probably a need to do more things," he added.

Beyond the announcements of Dubai's architectural grandeur is the untold story of delayed projects and those that never saw the light of day. CNBC visited several abandoned construction sites and spoke to many investors hurt by the last property crash; nobody agreed to appear on camera due to ongoing litigation or fear of retribution.

Read MoreDubai property market still sparkling...for now

There is another fundamental difference this time round. Turmoil in the Arab World, from Libya to Syria, means wealth is often looking for a new home, and most roads lead to Dubai. If you've got money, there are plenty of ways to spend it here without getting asked too many questions. Case in point: An estimated 70 percent of property transactions are in cash.

Mahesh Menda, a prominent investor who came to Dubai over three decades ago and was among the first buyers at one of the Emirate's most prestigious addresses, is no stranger to the property market's volatility.

"Even today, if I had to buy land, or say a luxury apartment, the best price I pay in one of the best towers is a thousand dollars [per square foot], give or take 10-15 percent. I compare that to New York, to London, to Bombay…this was going for a song".

According to the Dubai Land Department, the top foreign buyers of property in Dubai are from India, the United Kingdom, Pakistan and Iran.

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A rapidly growing pipeline of projects is only fueling the "bubble talk" in the city's offices and cafes. The government plans to build a mall bigger than the world's biggest it already has, an entire addition to downtown Dubai with villas, hotels and residential apartments. In total, JLL forecasts more than 40,000 additional units to come online through 2016.

Strong economic growth will fill a large chunk of that space. The IMF expects expansion to average 5.5 percent until the end of the decade, underpinned by the city hosting the world's fair, the Expo in 2020.

You have to visit Dubai to get a sense of the scale of the construction boom that is underway. And with more grandiose projects announced, the next few years will be a real test for whether the Dubai property market has actually matured.

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  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.