ABU DHABI: Abu Dhabi remains far from entering a boom-and-bust cycle in its real estate market even though property prices in the wealthy emirate are rising sharply, executives said at a major industry fair.

Selling prices for residential units in Abu Dhabi rose an average 27 per cent from a year earlier in the first quarter of this year, according to consultants JLL. Rents were up 11.5pc.

Both Abu Dhabi and neighbouring Dubai suffered property price plunges of 50pc or more as bubbles in their markets burst between 2008 and 2010, so the latest upswing has raised the possibility of them overheating again.

That risk was largely dismissed at this week’s Cityscape property exhibition in Abu Dhabi, however. Industry executives said the local market had room to rise further without becoming overstretched, and that it had not become as frenzied as Dubai, where some prices have returned to near their pre-crisis peaks and a pull-back looks possible as soon as next year.

“I think the market has still got some way to go in terms of growth. Values have remained very stable for a considerable amount of time,” Paul Maisfield, chief executive officer of real estate management firm MPM Properties, said of Abu Dhabi.

“It’s only in 2013 that prices started to appreciate. We’re seeing that extend into Q1. Prices will continue to grow throughout this year.”

Average prices in Abu Dhabi and Dubai are not far apart; according to an estimate by JLL earlier this year, average apartment prices were 1,190 dirhams ($325) per square foot in Abu Dhabi, only marginally below 1,220 dirhams in Dubai.

However, parts of the Dubai market, which began rebounding in late 2011, have seen more wild swings than Abu Dhabi. There has been a much bigger influx of foreign money, some of it highly speculative.

By contrast, the Abu Dhabi property market’s recovery has been triggered largely by local government regulatory steps to stimulate demand, including a decree depriving Abu Dhabi public sector employees of their housing allowances if they do not live within the emirate’s borders.

Last November, Abu Dhabi scrapped a 5pc cap on annual rent hikes, which made investment in property more attractive; some landlords have raised rents by as much as 50pc.