As Dubai’s real estate market shows signs of recovery with prices inching higher in several locations, many residents and newcomers are pondering whether to buy or rent. However, new government regulations that are yet to be finalized might help make this choice.

As it emerged earlier this year, the UAE Central Bank is moving to cap home lending at 50 percent for expatriates and 70 percent for nationals. The step is seen as a measure to avoid another episode of banks’ overexposure to the property sector as witnessed after the economic crisis in 2009. If passed, only individuals who have a strong cash base will be able to afford to buy, forcing many others to rent instead. Buyers might be looking at areas such as Emirates Hills and The Palm, with prices of the luxury villa market anticipated to increase up to 10 percent this year.

Those determined to buy in high-end areas such as Downtown Burj Khalifa, home to the world’s tallest tower, and The Greens, will need to act fast. Analysts have estimated house prices rose 20 percent in those locations last year compared to 2011 and say a similar increase this year is very likely.

For those on the lookout for a good investment, the emirate’s house market appears promising, compared to other international cities, including Geneva, Paris, Shanghai, where prices are expected to fall, according to industry analysts.

However, the proposed government mortgage cap and new supply may impact demand and reduce pressure on price increase in mid-market units.

On the other hand, residents who will opt to rent a house are expected to be saddled with higher residential rates this year, after a 16 percent increase last year, according to a recent report on the sector. A further influx of wealthy individuals to the emirate this year is expected to push demand for residential units higher, leading to price growth. That said, there’s a silver lining.

While the market gears up to add 18,000 residential units in 2013, helped by broader recovery in the sector, not all areas and projects will benefit from the upturn equally. Rents of high-end residential apartments and houses in close proximity to landmark buildings and metro stations are expected to see a significant boost. Secondary locations will also see a price augmentation, however, lower-end units in underdeveloped locations may not see any dramatic changes.