“Build it and they will come” was the phrase on everyone’s lips when the slick and shiny city of new Dubai began to emerge from the desert and new islands were created in the Arabian Gulf. But thousands of investors took a hit when Dubai’s property market crumbled and the off-plan frenzy came to an end.
However, given that it's just when a market appears to be on its knees that the canny investor takes an interest, just where is the Dubaiproperty market now? A large amount of stock is still coming on the market in Dubai (somewhere in the region of 25,000 units in 2011 alone, according to global real estate company Jones Lang LaSalle) so is now a good time to buy or is it worth waiting for prices to fall further?
Whilst some lessons have been learnt about short-term investment, known as ‘flipping’, there are still opportunities for long-term investment, with the mainly foreign workforce needing rental accommodation for the usual two to five year period they work in the Emirate.
Rents have dropped significantly since 2008, when they were unrealistically high, and now is certainly a tenants’ market, but compared to many other global locations rents are still high. Bear in mind, however, that tenants have extensive rights under Dubai law: even if the landlord wants to sell the property, unless there has been some default on the part of the tenant the landlord must give the tenant at least 12 months notice before they can be evicted.
There are signs that Dubai’s appeal as a tourism destination is bouncing back, and the Emirate is now better value than any point in recent history, meaning ongoing opportunity for short-term holiday lets in properties within the more sought after locations, such as the Palm, Marina and Jumeirah, where rents are unlikely to fall much further.
Hotel occupancy levels are doing well too, with excellent infrastructure in place for the tourists, such as the Metro and the new Terminal 3, while Dubai still has the appealing factors for tourists that it always had, for example the Burj Khalifa (the tallest building in the world), the Atlantis, sporting events and the Dubai Mall.
In established lifestyle projects, such as the Old Town and Burj Khalifa district, as well as the better properties in Dubai Marina and Palm, the major falls in prices have already taken place and values seem to be levelling out. In some of the less established and less desirable areas there is probably some significant way to go with price falls.
If you’re considering buying a lettable key-ready holiday apartment in a completed development, then the best bets tend to be shoreline apartments in developments such as Tiara Residence and Oceana apartments, on Palm Jumeirah, as these are good options for holiday apartment lets. Prices start at around AED1.3-1.5million for one-bedroom apartments.
Make sure you check the title deeds - request evidence that your seller actually owns the property, by asking to see the original deed.
You can apply for a visit visa by virtue of your ownership of a property in Dubai, subject to certain conditions being met, including the property being worth at least AED1million, and the owner proving a personal income of at least AED10,000 per month. If your application is successful, you would be granted a six-month multiple entry visit visa. Alternatively, if you are employed in the UAE or have invested in a business here, you can explore the option of being sponsored by your employer or having an investor visa.
Aside from the purchase price, the two main fees payable will be the Land Department’s transfer fee and the broker’s fees. The Land Department’s transfer fee is two per cent of the purchase price. Sellers would prefer that the buyer pays the full two per cent but there is no reason why that should be the case. A fair compromise would be that it is shared 50/50. Likewise in relation to the broker’s fee. If there is a real dearth of buyers and the broker is keen for the sale to go through, he may even be prepared to negotiate on his fee.
Request detailed information on the current service charge budget, and in particular the amount payable to the owner of the common parts of the building and also to the master developer in connection with the master community.
In order to minimise legal hassles on death, it is important to ensure that a valid will is put in place, which covers your property in Dubai. In the UAE, succession of real estate is a grey area and the court with jurisdiction to deal with inheritance issues is the Sharia Court. Matters are dealt with case by case. This wide discretion, coupled with uncertainty of the law itself, can leave expatriates with an unfavourable succession solution if no advice is obtained.With thanks to Cluttons UAE and Claire McCarthy at James Berry Associates.