Dubai realty on the rise

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Dubai realty on the rise

Banks are offering attractive mortgage rates for would-be home buyers

By Renan Bourdeau (PROPERTY FOCUS)

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Published: Sun 14 Jul 2013, 10:23 PM

Last updated: Tue 7 Apr 2015, 7:19 PM

The Dubai Marina multi-purpose development. High profile launches and favourable economic reports boosted the Dubai property market during the past six months. — AFP

The six months running up to the holy month of Ramadan have been generally a very upbeat period for the property industry. And as we meet colleagues and friends at Iftars over the next few weeks I’m sure talk will cover just how well the sector appears to be doing after something of a rough trot.

We have all watched the steady rise in the real estate market over the last year and have applauded exciting, high profile launches, favourable economic reports and several signs that Dubai is back on top at an international level.

However, we must beware of a lurking danger. While there are clearly genuine end users making new property purchases, unfortunately a lot of the rise can be attributed to investors who are looking to make a quick buck. Yes, the dreaded flippers appear to be back.

Just to clarify, flipping is the practice of investors swooping into a vibrant property market, snapping up an apartment or villa, before ‘flipping’ (reselling) it straight away at a large profit.

Like any other fast growing property market, the UAE obviously has speculators, but — as we witnessed earlier — too much of this speculation and an imbalance of too many investors versus end users can result in a sharp downfall. Any sustainable product or service needs its fair share of end users to thrive — and real estate is no different.

We really need to get back to the concept that homes are built to be lived in and that vibrant cities like Dubai and Abu Dhabi will do best when it is properly inhabited with people building real lives here.

So what can be done to avoid a dangerous economic situation developing?

Well, I think there needs to be a much more concerted effort by the relevant parties at the heart of the industry to do more to tackle the problem themselves. For example, developers can put in place certain terms and conditions to limit or control flipping such as minimum time periods before resale is allowed, and so on.

To be fair, some developers have already introduced measures to combat the problem, but much more needs to be done. The authorities could perhaps consider introducing larger transaction taxes for people who flip their properties or sell before a minimum set period.

Another thorny issue is the proposed mortgage cap law that has been put forward for non-UAE nationals. It is a complicated subject but many in the industry argue it might deter some genuine buyers who see the UAE as home, who intend to stay long term and who would like to buy rather than wasting money each year on rent. These are the very people we should be encouraging, surely?

On a positive note, I read recently about a suggestion that non-UAE nationals could be offered longer-term visas, or even proper residency, so that they feel more comfortable and see a real future in the UAE. This is something many countries around the world already do and the impact on the economy and society can be very beneficial.

Families and individuals who are committed to life in the UAE, but daunted by the prospect of buying, really don’t need to be. There are different ways of financing property purchases in Dubai, such as off plan stage payments, which most developers do offer. The buyer will pay an initial deposit and then the balance in structured payments (which are held in Escrow accounts) through to completion.

Also, due to much fiercer competition in the banking sector, banks are now offering very attractive mortgage rates — often below five per cent. In other words, there are definitely options out there for would-be home buyers.

Obviously, a growing property market is good for this country and the economy in general, but while there will always be some speculators, enough attention and care also needs to be given to genuine end users.

In the end this will help sustain this property market, encourage economic growth and allow more people who love life in the UAE to really and truly call it home.

The writer is the managing director of Views expressed by the author are his own and do not reflect the newspaper’s policy

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