To buy Dubai?

Since the discovery of oil in the late 1960s, Dubai has embarked on an astounding transformation from tiny fishing village to a thriving international metropolis. The unique combination of restricted size and almost unlimited wealth has triggered a property explosion. Nowhere else on earth will you find a place where human ingenuity and determination has so comprehensively shaped the living environment.

There is a tremendous amount of property to choose from in Dubai. 90% of properties are either off-plan or due to complete shortly. Combined with rising prices, this creates ideal conditions for an investment market. However, the same conditions could potentially create a bubble. So far, this doesn’t seem to be happening as the vast majority of supply is still under construction, so the relationship between minimal supply and very high demand is not quite the same as in any other market.The sheer amount of off-plan property available means that prices are rising fastest for completed properties and for villas rather than for apartments.

Recent legislation in Dubai has lessened the risks for property investors. Law No 8 on Guarantee Accounts is intended to control how off-plan deposits are channelled and should safeguard against unscrupulous developers. It states that banks or financial institutions certified by the Dubai Lands Department must now manage these funds under separate trust. Buyers no longer need to worry that their deposits will be used for other projects or misappropriated altogether.

The most active international buyers in Dubai are British and Irish, drawn by the impressive rises in values.Villas on The Palm Jumeirah (the man-made island, as famous for its footballer buyers as its whimsical palm-shaped layout) were initially sold at £90 per square metre but now sell for as much as £4,207. It’s been estimated that villas on the development will have changed hands ten times before completion in May 2008 and are now worth around £2.8 million each.

Rental yields are also high (6-15% dependent on location) as demand continues to outstrip supply. Rents are largely paid in advance, sometimes up to one year in advance, a particularly appealing factor for those considering a buy-to-let property in the emirate. On the downside, service charges on new developments can be anything up to £4,000 per annum and may be requested by the developer up front, so be aware of this additional cost! Unlike other countries, property hotspots in Dubai are based on individual developments rather than cities or areas.

Luckily the emirate has a very internetconscious society so a quick online search will give you the name of any project along with honest opinions within a minute. Mortgages are available in Dubai but can be difficult to arrange and on prohibitive terms. Some developments do offer finance schemes backed by banks such as Tamweel or HSBC, but these have to be prearranged by the developer. The buying process in Dubai is very straightforward. In most cases buyers need to pay a holding deposit of around £1,500, securing the property for a certain period, often only 48 hours.Within that period, buyers then need to transfer the remainder of the deposit - typically 30% of the purchase price, but can be anything between 5%-30%.

A purchase contract is issued once the developer processes the payment. If you keep the property until completion you may need to pay a property registration fee to the Lands Department of 1.5% of the purchase price. If you re-sell the property prior to completion, the developer is likely to charge an administration fee, usually around 2%, but it can be more. As there are no searches to be conducted or issues with title, it’s technically not essential to have a solicitor, that said, expert legal advice is always a wise precaution. On completion buyers receive a residency visa, which covers the buyer, spouse and any children under 18.

There are no restrictions on renting your property and management fees are usually between 5% and 15% of rental income.There is no tax department in Dubai so neither rental earnings nor capital gains are subject to any taxation, although there may be implications for your UK tax bill. Thanks to Property Frontiers for expert advice on the Dubai property market – Cloud Nine.

Information

For more information and ideas about property in Dubai, visit:

www.bhomes.com

www.propertyfrontiers.com

www.selectproperty.com

www.thefirstgroup.com