Three years on from Dubai’s Land Registration fee hike

BY: AMNA UMER SULTAN

It’s been exactly three years since the Land Registration fee, for buying and selling properties in Dubai, was doubled from the long-standing 2% to 4%.

This increase has had far reaching repercussions in the market since its inception.

These immediate short-term effects were brutal. Many first-time buyers had to pull out of their mortgage transactions because they couldn’t afford the extra cash injection that was required.

The 2% increase of the property price meant a mortgaged buyer, based on a AED 3million property, had to find an additional AED 750,000 – which is in fact an additional 8% when calculated on the total cash input from the client.

2% property increase calculation

Calculation showing the total cash input from the client

A lot of prospective buyers deferred their decision to buy with a ‘wait-and-see’ approach. Many feared that this hike would cause the market to soften and prices would fall, causing scaremongers to predict the end of Dubai real estate.

The Long term and most profound effect of the increase was it put an end to almost all speculative buying and subsequent quick selling. It’s simply not feasible to buy and sell within a few weeks or months when transaction rates cost up to 10%. Over the next 12 months, into 2014, transactions reduced greatly and thus there were fewer mortgage transactions which eventually caused a drop in house prices.

Dubai saw a slow and steady decline of up to 20%

It wasn’t as severe as the 2008 property crash but Dubai saw a slow and steady decline of up to 20% over the following 24 months.

Despite this, I think the effect of this has been largely positive for the real estate sector in Dubai.

With the speculators largely put to rest, a real market has emerged, where buyers are now looking to buy with a medium to long-term view. Rental yields have come into play for the first time in Dubai. Homebuyers have a wide variety of options to choose from as well as more time to evaluate and make an informed and calculated decision, which has prevented another property bubble, which lead to the crash in 2008.

Developers are offering excellent discounts

The core strength of our business was and remains investors and end users who even during the worst phases of the last 3 years transacted with us because they believed in the basic fundamentals of Dubai, as well as having a long term approach to their investments. This meant McCone Properties continued to have a study business thanks to the advice we gave our clients and the trust we received in return.

Downtown Dubai

There is no better time to buy in Dubai than now according to our expert, Amna Umer Sultan

Today, when the market has almost bottomed out and people have long accepted and absorbed the extra 2% transaction cost, there is no better time to buy than now in Dubai.

Developers have fabulous projects on offer with post-handover payments, discounts, built in finance deals and more incentives. Coupled with high cost of renting (even after the slight decrease in the average rental this summer), buying is still the way to go.

If you’re an investor, then you’re looking at 5% net ROI on ready property and as much as up to 8% net ROI on off plan purchases.

 The cost of borrowing is much less than the cost of renting, for end-users

If you’re an end-user, then currently the cost of borrowing is much less than the cost of renting. By buying, you’d be paying less each month with your monthly instalments than you’d be paying your landlord. Plus, you’d be building equity in a world-class property.

McCone Properties is in the ideal position to guide and help you achieve your goals when buying, or renting, property in Dubai.

As a company we have strategic alliances with ancillary services such as financing options, currency exchange, home maintenance and repairs and can make your purchase experience seem free and one stop.


Leave a Reply