Purchasing property in Dubai is relatively straightforward. Apartments and villas can even change hands without the use of solicitors (whether you wish to use one is up to you). Property is also being sold well below the cost of equivalent in London, Singapore and Hong Kong. A Demand saw all the development on Palm Island sold out within days of their launch and so the only way to get one is through the secondary market and Real Estate companies who hold these.
Buying Process
- Firstly if you’re serious about buying property in Dubai you should have your finances sorted out before you begin searching for real estate. This is because the purchase process, when underway, can progress very rapidly and if a property investor does not have a mortgage agreed or money to hand the sale can fall through because the market continues to be so fast moving
- Most properties must be purchased off plan. This is because few have been completed and instead are still in stages of development.
- When a development is announced buyers put down between 10% and 30% of the cost of the property as an initial deposit. They are then given a property sales agreement (PSA) with their name on it and details of the property they have reserved
- The development in this agreement stipulates the schedule for further payments. Typically this will be 20% instalments every six months until the property is finished at which time the final 10% of purchase price will be paid after a final inspection and the keys are handed over
- If during the construction stage of a property a second party wishes to purchase the property from the owner then the process is straight forward
The buyer pays the owner an agreed sum which includes those payments the owner has already made to the developer and any premium by the owner
Exchange of contracts with owner at the developers head office usually within two week period
The developer will then charge a percentage of the original price of the property (typically between 2% and 7%) to reissue the PSA with a new name on it and update their title records. This must be done either in person or with the buyer’s authorised representative. The whole process takes a matter of minutes
Contract re-issued in buyers name – there is no legal representation for either party or any stamp duty implications
The buyer will then continue to pay the remaining instalments to the developer as laid out in the PSA.
Commission, typically 2 to 3%, is paid to the agent
- Although there are few leasehold (99years) properties, the majority of properties in Dubai are freehold. When you have decided on the property you want and have finalised any negotiations on price, it is normal practice to pay a small reservation deposit in cash. For an apartment, expect to pay a deposit of around GBP 1000, and up to GBP 3000 for a large villa. This is refundable if the vendor has a change of heart, but is not refundable if you cancel. If buying off plan, then a deposit of 10% of the purchase price is required at the contract signing stage, followed by several more instalments. These will differ per plan, but will be to an agreed timetable over a period of months
Taxation Issues and Fees
- There are no government taxes of any kind related to the purchase of property in Dubai. Any service charges are paid annually to developers for maintenance, landscaping and refuse collection for the period of ownership
- On most developments there is a service charge payable after completion. These are only payable in relation to common areas such as parks within the Development as well as for road maintenance. Clearly, as the cost of maintenance increases, then so will the charges but few anticipate huge increases. The maintenance of your property and grounds is entirely separate as you would expect with freehold property ownership
Recidency
- In general the government issues permanent residence visas to new property-owners and their immediate family as per the latest immigration regulations
- The Purchase Sales Agreement (Contract) stipulates that you will be entitled to receive a Residence Visa for as long as you own the property. In accordance with the normal Immigration laws in the UAE, your Residence Visa will be renewable every three years
Investment Potential
Following the inimitable levels of success achieved by Dubai’s fledging property market in such a short space of time, property investors are now beginning to take a slightly more cautious approach to purchasing however as enough historical data exists to show which developments and property types offer the best capital growth returns and rental yields.
One fundamental point on which property investors in Dubai can have great confidence is the fact that the government of Dubai have interests in all the major real estate development companies in the emirate. It is therefore absolutely in their best interests for the real estate sector to remain attractive, buoyant and growing.
The government has created within the emirate a series of themed free zones such as Dubai Media City and Dubai International Financial Centre meaning that more and more overseas and international companies are basing themselves in the emirate and taking full advantage of the fiscal and structuring arrangements on offer in Dubai. These companies are bringing investment and creating vast employment opportunities which in turn attract growing numbers of expatriate professionals to Dubai annually. These professionals seek accommodation to let or purchase and fuel the property market. The demand for completed apartments and villas to rent or purchase in Dubai is currently so far outstripping supply as to create a problem. Luckily the rate at which new high rise developments are coming to completion will curtail the problem in the short term but rental rates are increasing rapidly and are set to remain high.
An investor who purchases apartments in the best, most accessible areas of the emirate can enjoy the best rental yields currently available. Alternatively an investor who would like to buy off plan and flip upon completion will likely find that well proportioned and situated villas and houses will return the best capital appreciation and sell more quickly.
In terms of the future for Dubai, the government are not resting on their laurels. Dubai may already be the leading trading and commercial centre in the Middle East but now Dubai wants to establish itself as the number one tourist destination in the region and possibly the wider world given time. To this end they are creating the multi billion dollar Dubailand which will take until 2018 to complete fully and which should create a brand new holiday home market as well as creating demand for villa accommodation to let around the Dubailand vast site. Property investors are watching the development phases keenly and seeing which new property developments being announced are most likely to prove attractive to the holiday market in the medium to long term.
There is still so much to fuel the property investment spark in Dubai. The unfailing commitment of the government to promote the emirate in the best possible light on every level gives an investor the confidence he needs in Dubai and the levels of overseas interest in Dubai for employment, business and leisure means that an investor has a growing market to rent or buy his underlying investments.
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