Buying in Dubai
Fancy an apartment with gemstone-studded walls, or a Tuscan-style villa on the desert dunes? While investing in Dubai’s weird and wonderful homes – all set in their Dali-esque landscape – may have been, in 2008, like building castles in the air while the property bubble grew to bursting point, today there are many sound reasons for home-seekers, particularly foreigners, to buy a residence in Dubai.
For starters, the city is the perfect tax haven for wealthy foreigners, according to BBC Business News. The UK’s public-service broadcaster also reported Dubai as being ‘a safe haven for regional investors in a stormy Middle East’. For wealthy Asians, it said, ‘it is a close-by, comfortable retirement village’. And for everyone else, the most populous city and emirate in the UAE offers a unique blend of East and West, with a robust expat community and no special permission needed or hidden hoops to jump through when it comes to buying as a foreigner.
While the BBC reported that ‘a surge in house prices and sales from 2013 signalled the return of confidence to Dubai’s property market after its disastrous past’, Bloomberg Business in February reported that ‘declining currencies in European countries whose citizens are among the leading buyers of Dubai homes are combining with falling oil prices and a tax on foreign property held by Indians to push down home prices in the emirate’. So, if anything, now is the time to nab a bargain.
Says Ryan Mahoney, CEO of Better Homes in Dubai, ‘Prices are good and buyers have negotiating room as the market has slowed. Sellers asking exorbitant prices in 2014 are now asking a far lower price.’
‘The market is maturing and there is more choice as Dubai continues to change and evolve and, undoubtedly, the future is looking positive,’ agrees John Stevens, managing director at the Dubai-based real estate agency Asteco. ‘The regulations are there to try to control the growth and take some of the excesses out of the marketplace.’ (These excesses almost sent the city’s economy into a tailspin in 2008.)
However, if potential homeowners have their eyes on a particular property or area, a great deal may not be in sight. According to Laura Adams, managing director at Carlton Real Estate, also based in Dubai, the main reason for slower sales in 2014 was the low supply of ready property and an oversupply of off-market sales.
‘The market in Dubai is still moving, as we are not led by economy but by supply and demand,’ she asserts, adding that early signs for 2015 point to sellers bringing prices down to more acceptable market levels. Her advice, then, is to strike while the iron is hot: ‘Dubai is an amazing place to live – it’s crime-free, clean, and people are respectful of one another. It’s also one of the only places in the world where you get appreciation on your property of up to 25 per cent over a relatively short period of time, not to mention seven to eight per cent net return on your investment for a rental property.’
Where to buy and how to do it…
‘There are no restrictions or permits needed to buy as either a resident or a non-resident in any freehold area, such as Dubai Marina, Palm Jumeirah, Downtown, Dubailand or Emirates Living,’ says Adams, who maintains that of all these expat hubs, the first three are the most popular.
Adams says an apartment in Dubai Marina can cost anything from AED1 300 (about R4 300) to AED2 700 (about R8 850) a square foot (0,09m2). ‘For a villa in Emirates Living, expect to pay from AED1,8-million (about R6-million) for two bedrooms, while a signature villa on the Palm Jumeirah will set you back a cool AED28-million (about R92-million),’ she says.
‘The first step to purchasing a property in Dubai is to make an oral offer to the seller,’ advises Expat Arrivals, a dedicated destination info site used by, among others, global relocation companies. ‘Once this is accepted, a formal sales contract is drafted and agreed upon between the parties, a deposit is made, the buyer obtains financing, the seller ensures that the property is not encumbered by anything that goes against what has been stipulated, final payment is made, or a payment plan is solidified, and eventually the deed is transferred.
‘There are, of course, slightly different sets of protocol, depending on whether one purchases property from a developer, called an off-plan purchase, or purchases property from a private seller, called a resale purchase.’
It is not unusual for a foreigner to be required to get bond approval before the seller will sign over the house. ‘Prior to the market crash of 2008, it was fairly easy for expats who had a high credit rating to obtain a bond in Dubai that covered nearly 90 per cent of the property cost,’ says Expat Arrivals. ‘However, since the recession, banks have tightened their lending procedures and now it is not unusual for buyers to have to put down between 20 to 50 per cent of payment for their property in cash.’
In terms of transaction costs, ‘buyers will pay two per cent of the total sale price to the agent and four per cent transfer fee to the Dubai Lands Department for the legal documents,’ says Adams. The agent does all the conveyancing.
- BBC Business News, 12 April 2015, ‘Amid fears of more bubble trouble, who’d buy in Dubai?’
- Bloomberg Business, 17 February 2015, ‘Dubai Property Set to Tumble as Currency Adds to Woes’
- Embassy of the United Arab Emirates in Pretoria: uae-embassy.ae/Embassies/za
- Asteco: asteco.com
- Better Homes: bhomes.com
- Carlton Real Estate: carltonrealestate.ae
- Expat Arrivals: expatarrivals.com
Text: Jocelyn Warrington