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Dubai Interactive Map |
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Why Invest in Dubai? |
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There are many reasons why every different nationality is purchasing property in Dubai. |
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Legal and Financial |
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| With the Dubai property market still in its infancy in comparison with markets such as London, the legal and financial framework is evolving on an ongoing basis. The management of New England Real Estate have extensive experience of the legal infrastructure since its inception and access to the very best legal and financial information to ensure both our staff and clients are aware of the very latest information and how this might affect their judgment and subsequent choices. |
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Legal |
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| In many parts of the world it is usual practice to enlist the services of a lawyer when purchasing a property but this is not normally the case in Dubai. Contracts are drawn up by the developers themselves and money is usually directed straight to the developer or through the agents' own clients' account. If a client wishes to seek advice on their purchase, we at New England Real Estate can recommend a number of local law practices that have demonstrated a good working knowledge of the property law and have worked closely with our clients in the past. |
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Financial |
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Properties are normally paid for by a series of payments spread over the construction period. Payment schedules tend to be quite evenly spread requiring the majority of the purchase price to be paid before completion. All developments vary but typically the purchaser would be required to put down ten to fifteen per cent booking deposit followed by a similar sum every three months, but this can vary from developer to developer. However, if the development you are choosing has financing in place the mortgage company will normally deal with the lump sum payments allowing you to make monthly.
If you are buying a property of Dubai's expanding 'secondary sale' market then you could be required to pay a 'premium'. The premium represents the profit on the original sale price. Properties in developments such as Signature Villas on Palm Jumeirah have changed owners more than once so the premium being asked for may only represent a small profit for the previous owner. It is important not to get too hung up on 'premiums'; rather you should look at the price per square meter or foot, the location and facilities. |
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Lending |
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The mortgage market in the UAE is still very young and most banks will still look at the Original Price when calculating the level of lending available to an individual. For residents of the UAE, eighty to ninety per cent is achievable whilst seventy per cent is the norm for non-residents. The market has evolved over the last twelve months and lending has improved to take account of premiums. For example, on a completed villa where the Original Price was one million Dirhams and the re-sale value is now one million three hundred thousand, the bank will not only lend seventy per cent of the 'Original Price' but will lend on a proportion of the Premium as well, subject to valuation. When applying for lending on a property during construction, the bank will tend only to lend on the Original Price and not the Market Price.
The private developers are generally tied to one lender and offer a set percentage loan. Some private developers offer no lending at all which must be considered for re-sale.
Thankfully for the consumer this market has becoming increasingly competitive since the advent of the freehold law and is becoming increasingly so almost daily. All of the major international banking names you will recognise are now well established here including Standard chartered, HSBC, Lloyds TSB and Barclays Bank. Irrespective, New England has established close relations with most of the major lending banks along with independent mortgage brokers who we can help you with. |
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Dubai Financial |
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Irrespective of the spectacular growth of recent years, Dubai property prices are low compared to those in other European countries such as the UK, where markets are at all time highs. For example, even after the price increases we have witnessed over the past two or three years, the average villa or apartment in Dubai is significantly less per square foot in comparison to comparable cities like Singapore, Shanghai and London. |
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Whilst property in the UK, Spain, Ireland and Florida has proved a good investment for many private clients over the years, many of these markets have visibly reached a plateau in recent months. Investors are now either wary or increasingly taking profit or looking for new markets to invest in, such as Dubai. |
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The reputation of Dubai property has growing internationally with buyers from Europe, Kuwait, Saudi Arabia, Iran, Russia, India, Pakistan and other European countries investing heavily for both investment and lifestyle purposes. This wave of overseas buying only really began in Q2 2004 whilst other markets were not far from their peaks. |
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The UAE is very attractive from a tax perspective with no income tax or capital gains tax and the government is committed to retain the current tax structure for at least the next 50 years. |
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An increasing number of businessmen are moving their personal and business bases to Dubai purely for the above tax reasons. It has good communications being located midway between Europe and Asia and offers a number of specific and purpose designed free trade zones within which overseas corporations can base their businesses. |
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Many overseas buyers have purposely looked to purchase apartments or villas close to the coast of Dubai, either for use as holiday homes or for short term holiday lets. With tourism growth in Dubai running at around seventeen per cent per annum and almost fifteen million visitors expected annually by 2010, hotels boast one of the world's highest occupancy rates and as such there is likely to be a strong holiday letting market for tourists, particularly those with families. |
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There is no stamp duty, legal fees or survey costs involved in buying freehold property in Dubai. The only fee is a 1.5% land registry fee on completion. |
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Since the Dubai property market was opened beyond UAE nationals a host of laws designed to protect the consumer have been introduced, most notably the freehold law. Since that time these added layers of security have helped buyers attain a peace of mind which has contributed to the huge growth and confidence in the market itself. |
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Regardless of the quantities released, demand for property in Dubai continues to greatly exceed supply. For example in 2004, two hundred and forty thousand new residents moved into Dubai swelling the population above two million. The total now is around fifty thousand a month and rising; this ever upwards growth applies relentless pressure on the supply of properties, both for rental and freehold. Rents have risen rapidly and newly completed villas and apartments are snapped up and occupied quickly as buying and mortgaging a property is generally cheaper than renting. |
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At some point supply will begin to exceed demand even with Dubai's massive rate of population growth, but at the present scale of growth in the population, this is not anticipated to occur until well in to the next decade. |
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In the meantime, high rental yields of around 10-20% per annum are not uncommon and are subsequently attracting significant investment. |
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Property is becoming easier to finance with mortgages, and many international banks have now entered the market like Standard Chartered, HSBC and Lloyds TSB. The increased availability of mortgages has attracted both local and overseas interest. |
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Dubai Properties - what do you get for your money? |
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Every freehold purchase of as property in Dubai comes with a resident's visa, which allows the owner to reside in Dubai. However, this does not grant the purchaser an automatic right to a work permit. This added attraction has proven particularly popular for Asian investors and the one billion residents from the Indian sub continent. |
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Properties in Dubai tend to be finished to a very high standard, though you need to see for yourself and check that it meets your standards and requirements. Villas are generally detached, with gardens and communal landscaping. Townhouses are far more spacious than equivalent apartments in many cities and the average two or three bedroom apartment in Dubai is probably double that of its equivalent in London, Singapore or Hong Kong. Competition amongst developers encourages them to be creative and subsequently high quality amenities are normally fitted as standard. |
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Many UAE developments offer free or discounted access to superb facilities ranging from swimming pools, golf courses and equestrian centres to health clubs and spas. A large number also include on-site bars, restaurants and supermarkets. |
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A 'can do' Government |
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Much of the success of Dubai's remarkable economic development can be attributed to a progressive and enlightened Government with a clear vision and strategy for the country's economy led by His Highness Sheikh Mohammed bin Rashid al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai. It is also a Government which has a remarkable track record in executing ever larger, more complex and increasingly ambitious projects such as the Burj Dubai.
The highly attractive range of incentives which the Government has put in place for inward investors includes:
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Zero tax on profits and income |
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100 per cent repatriation of capital and profits |
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100 per cent ownership in free zones |
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No foreign exchange or trade barriers |
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A stable and freely convertible currency pegged to the US dollar |
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A low common external tariff of 4 per cent (with commodities such as food items, pharmaceutical products and raw materials exempt) |
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Fast track, 'one stop shop' company formation in the free zones |
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Summary |
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Dubai is emerging as the business, shopping and tourism centre for the region, sitting strategically as it does, half way between Europe and Asia.
The scale of construction and development has to be seen to be believed, and is akin to the sort of growth that Hong Kong and Singapore experienced in the late 1980's. Probably only Shanghai has the same sort of growth rates and speed of development, and this is based more the demographics of the Chinese population.
There is enormous wealth centred in the Middle East, principally because of high oil and gas prices, and a large proportion of this wealth is finding its way into local residential and commercial property markets. Overseas investors have the opportunity to get in early on this land development boom which is predicted to last the next five to eight years in terms of development.
Prices have risen but are still cheap by overseas standards. There are many different types of properties to suit investors' tastes and whilst there still remain specific opportunities for short term gain, the market is now developing into a more mature and structured market. |
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