Purchasing accommodation guide for expats and global nomads
A history of the Dubai property market
One wonders if the ruler of Dubai, Sheikh Mohammed bin Rashid Al Maktoum, could have imagined how his decision to allow foreigners to buy property in some areas of this Emirate would so radically affect his city. For six years, from 2002 to 2008, fortunes were quite literally made as property prices doubled and trebled. Investors and speculators flocked to Dubai in a manner which can only really be compared to the California gold rush of the mid-nineteenth century. And many did find the promised gold as prices continued to soar.
Developers raced to create new projects of apartments and villas on the outskirts of the city and many of these were purchased off-plan. Everyone was confident that the planned developments would be built and completed in a timely manner and that buyers would be there when they were finally finished. As people put down deposits on these buildings, no one suspected that they might lose money. The only question in their minds was just how big their profit was going to be.
There is a rule in investment that if something appears too good to be true, it probably is. Dubai had seemed to be the exception as prices showed no sign of slowing down. But then the credit crunch hit the world and Dubai realized that it wasn’t immune. The effect was felt in all sectors of the property market. Many projects were put on hold or canceled. Many people had borrowed money they did not have and suffered severe losses. Buy-to-let property owners found that falling rents and increasing mortgage rates meant they were unable to cover their monthly mortgage repayments. The future of the property market looked bleak.
The property market today
Today foreigners are still buying property. People talk about the property market having stabilized. Today, however, most buyers are people who are relocating to Dubai and actually want to live in their property. For those who are interested in buying their own property there are some important things to bear in mind.
First of all, foreigners are restricted by law as to the areas where they can buy property. They can only buy in new developments on the outskirts of the city or in the Old Town area near the Burj Dubai. In contrast, local Emiratis can buy and sell property anywhere in the city. However, in reality other restrictions are in place as mortgage providers will only lend you money to buy property in certain developments. Although the list of developments varies from mortgage provider to mortgage provider, if you cannot find someone to lend you money to buy a property, it is usually with good reason. The approved projects are usually those being built by developers who have a track record of completing projects.
Mortgages
Mortgages are available in Dubai, although interest rates are high. When you are ready to buy, you should be able find a mortgage to suit your needs if you are prepared to shop around. The mortgage you choose will depend on the size of the deposit you are able to pay, the length of the mortgage, whether there are any penalties for an early settlement, and whether or not you want the loan to be sharia-compliant (consistent with the principles of Islamic law). You will typically have to pay a deposit of at least 10% and rates vary between 1.25% at the Bank of Abu Dhabi and 9% at the Abu Dhabi Commercial Bank. Your mortgage provider will often require you to take out life insurance. Those mortgage providers who offer lower rates of interest may require you to buy a particular life insurance package.
When you are calculating the cost of your property, you should be aware that there is no stamp duty when you buy, no income tax on any income you may earn if you rent the property out, and no capital gains tax when it comes time to sell. Of course, there may be taxes payable in your own country and you should check with an accountant or financial advisor who is knowledgeable of the tax situation in your home country. What is payable is a 1.5% land registration fee to the Dubai government and you will also have to pay a fee to the estate agent which is typically 2% of the value of the property.
Popular mortgage providers include:
Amlak Finance
Tel: 800 26525 (800 AMLAK) / 04 427 4700
http://www.amlakfinance.com
Barclays
Tel: 04 422 3989
http://www.barclays.ae/
HSBC
Tel: 800 46873 (800 HOUSE)
http://www.hsbc.ae/
Mashreq Bank
Tel: 04 428 6000
http://www.mashreqbank.com/
National Bank of Abu Dhabi
Tel: 800 02221
http://www.nbad.com
Property Financelink
Tel: 338 3131
http://www.propertyfinancelink.com
RAK Bank
Tel: 04 213 0000
http://rakbank.ae/
Standard Chartered
Tel: 04 313 8888
http://www.standardchartered.ae
Tamweel
Tel: 8800 826 9335
http://www.tamweel.ae
Finding a property
To find a property, you should contact a reputable estate agent. They will be able to provide you with a list of all the freehold properties that foreigners are allowed to buy. In fact, all the property you see for sale in the English language newspapers/magazines and listed with real estate companies will fall into this category. The main areas you will be looking at are in new Dubai, the Old Town and new developments on Emirates Road.
Many agents will list the same properties so you may find some overlap. You should only worry if an agent is unable to show you around a property. Agents that really do represent a property will have access to the keys. Sometimes a house will be left open, or the estate agent can arrange for it to be left open and you will be able to look around at your leisure.
As with any gold rush, the property boom that existed up until the end of 2008 attracted many cowboys to the city. Most of these have now left, but some do remain. The best thing you can do if you are going to buy a property is read all the small print and use an independent lawyer to help you.
Reputable real estate companies include:
Better Homes
Tel: 600 52 2212
http://www.bhomes.com
Dubai Luxury Homes
Tel: 04 318 3000
http://www.dubailuxuryhomes.com
House Hunters Real Estate Brokers
Tel: 04 340 1940
http://www.househuntersdubai.com
Sherwoods
Tel: 04 343 8002
http://www.sherwoodsproperty.com
There is also a property portal which lists properties from many different real estate companies. It can be found at: http://www.propertyfinder.ae.
Procedure for Purchasing Property
The law surrounding the purchase of property is not always transparent and often changes. For this reason, the help of a good lawyer specializing in property law is advisable. Some estate agents may recommend a lawyer, but most expats prefer to choose an independent lawyer that they know will be acting in their interests. To find a suitable lawyer, look at the list below or contact your local consulate. Your consulate will be able to provide you with a list of lawyers. Although there are many local law firms, most expats want to choose a lawyer who is experienced with the tax laws in their home country.
- You will initially sign a Reservation Contract. You will make a small payment of somewhere in the region of USD 3,000 which will take the property off the market for a short time, typically two to four weeks. During this time, your lawyer can make the necessary legal checks. If there are legal problems which force you to pull out, your money should be refunded to you. However, if you change your mind after this stage, you will lose that money.
- To proceed, you will have to sign a Preliminary Purchase Contract. This will be accompanied by a much larger payment, typically 10% of the sale price. There is no cooling-off period in the UAE and this contract is legally binding. In fact, the term “preliminary” is somewhat misleading in this context as this contract is a commitment to buy. If you change your mind at this stage, you will lose the deposit and the seller may take action against you. For this reason, it is important that you carry out checks before you sign this contract. A lawyer can help you to draw up this contract so that it is subject to conditions or contingencies.
- The final stage is the payment of the balance of the sale price and the signing of the Final Contract of Sale / Title Deed. After this, the property will be yours and you must register the Title Deed at the Dubai land registry. Your lawyer will help you with this.
Lawyers in Dubai:
Al Midfa & Associates
This firm was founded over ten years ago. It has specialists in local and UK law and is able to provide a variety of different legal services.
Email: midfaadv@emirates.net.ae
Tel: 04 227 2701
http://www.almidfalawyers.com
Al Tamimi & Company
This is the largest law firm in the Middle East with over twenty years experience. It currently has three offices in Dubai.
Email:info@tamimi.com
Tel: 04 391 2444 / 04 331 7161 / 04 364 1641
http://www.tamimi.com
James Berry & Associates
This is a well-established firm based in Dubai.
Email: berry@jamesberrylaw.ae
Tel: 04 3317552
http://www.jamesberrylaw.com
Trench & Associates
This firm was founded by Cynthia Trench, the first female expatriate licensed legal consultant in Dubai. The expat lawyers in the company have a variety of different backgrounds.
Email: coordinator@trenchlaw.com
Tel: 04 355 3146
http://www.trenchlaw.com
