How to buy property in Dubai - the fastest growing city in the world

Recognised as the gateway to the Gulf, and voted as one of the world’s best holiday destinations, Dubai is one of the most desirable places to live on the planet.

Property specialists in Dubai

By choosing Volcano Estates as your real estate agent in Dubai you can be sure that every penny of your budget is spent wisely. We know the market inside out. We have the expertise and the contacts. That’s why we help make countless foreign buyers’ dreams of owning a luxury house or luxury waterside apartment in Dubai a reality every day.

Come and join them!

Buying Guide

This buying guide will serve as a basic overview of how you can purchase your new home in Dubai; arming you with all the knowledge you will need along the way. However, this document is not intended as legal advice and we do suggest you still seek guidance from a professional lawyer when considering entering the Dubai property market.

Why invest in Dubai?

• High capital appreciation. • High rental yields in completed properties. • Capital Gains Tax = 0%, Rental Income Tax = 0%. • Business hub of the Middle East; an increasingly important player in the world stage. • Future Demand: The Dubai population is set to increase from 1m to 3m, with tourism tripling from 6m to 15m, by 2010. • Future Supply: Demand-supply ratio is managed to maintain strong growth and returns. • Very affordable by international standards. • Excellent quality of property. • One of the most significant leisure destinations in the world. • Cosmopolitan global business centre with luxurious facilities and incredible beaches.

Usage

Investment

Dubai property comes in many forms so it doesn’t matter what sort of real estate investment you are looking for. There are hotels, motels, villas, ultra contemporary homes on the water, retail and business real estate and more.

Whether you are looking for Dubai property for your own use, to start a business, or to rent out for profit you will find that there is a lot of beautiful Dubai property to choose from.

The idea is to cash in now and buy Dubai property so that you can watch the property values continue to increase month after month.

Capital growth is likely to average in excess of 15% per annum.

Buy to let

With ever increasing world class tourist attractions and growing commercial markets, Dubai is seeing the demand for accommodation rapidly outstrip supply. This scenario has led to a very active and profitable rental market for most home owners.

Rental income currently yielding between 8% - 10% and a capital growth rate averaging in excess of 15% per annum, the figures provide attractive reading for investors.

An apartment of 120 sq. m. in Dubai might cost US$140,000, and would typically rent for around US$1,500 per month, giving a yield of 12.8%.

Smaller apartments of 50 sq. m. would cost around US$50,000 and rent for around US$350 per month, giving a yield of 8.4% per month. These two sizes represent the outer limits, maximum and minimum, of property yields in Dubai.

Yields in Abu Dhabi are not dissimilar - a 120 sq. m. apartment which sells for around US$130,000 might bring in around US$1,200 a month in rent.

There is a 5% residential tax assessed on rental value.

With projects such as Dubailand set to attract visitors in the millions, and the creation of many jobs, the expansion of the airports and ports and a heaving influx of new business activity, the market.

Buying contract

The Purchase Contract

Off-plan

Properties are 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 10/ 15% booking deposit followed by 10/ 15% every 3 months or even up to 20% instalments in some cases.

Resale

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 metre or foot, the location and facilities.

Purchases normally take no longer than two weeks to complete. It is important to have your funds ready in order to prevent disappointment.

Taxes & Other Costs

There are currently no government taxes of any kind when purchasing a property in Dubai. Neither is there a Capital Gains Tax. When the Dubai Lands Department registers title, buyers will pay a 1.5% tax based on the purchase price of the property. If they have a mortgage, they will pay 0.25% of the value of the loan. These issues will hopefully be dealt with in the forthcoming law.

A transfer fee is paid to the developer when transferring ownership from seller to buyer. The amount which varies between 1% and 7% of either the sale price or original price is normally paid by the buyer.

When purchasing a property in Dubai, there are no government taxes of any kind, nor is there any capital gains tax in Dubai on the sale of property. This has lead to an unrivalled saving as compared to the property markets of the UK and Europe.

Mortgages

Mortgages are normally non-status and at a fixed rate of between 5% and 6%.

Buying a property in Dubai's real estate market is comparatively no different than buying a property in any other long established real estate market. Whether the choices of payment being via cash or mortgage, purchasing from a private vendor or a development company, the buyer has the same choices, to either pay cash or arrange a mortgage finance agreement, spreading the payments over time.

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, 80% is achievable and 70% for non-residents.

Many internationally renowned banks and specialist mortgage companies are now offering a host of packages to meet your every need.

All properties are sold on a freehold or leasehold basis, and re-sale of a property is a routine matter, either via standard sale or by assignment of your agreement to another party, meaning the new party will take over payments to the developer.

Legal

Foreign nationals are now allowed to buy freehold properties in designated areas in Dubai. Gulf Cooperation Council (GCC) nationals are allowed freehold ownership anywhere in the Emirates.

Some of the developments available for foreign freehold ownership are: The Palm, Jumeirah, Emaar Towers, The Greens, International City, and others. In some projects, aside from the developments that are open for foreign freehold ownership, land can be leased up to 99 years.

Generally, residence visas are issued to property owners, which extend to their immediate families. These visas are renewable every three years during ownership.

Properties can be registered, and foreigners can be granted Land Certificates by the Dubai Lands Department. The sale agreement and other required documents are lodged at the Department for registration.

10 Reasons to Buy in Dubai

1. Prices are inexpensive by comparison to other similar trading hubs around the world, and are up by more than 20% in the past two years. There is scope for a substantial further rise, and certain properties have doubled in value already.

2. Property is a good hedge against inflation which is showing signs of re-emerging in the global economy. At such times the higher cost of debt servicing can usually be past on in additional rent, while the value of the property inflates and its debt is unchanged.

3. Rental income from property is a stable source of income, and while it might fluctuate, is highly unlikely to vanish altogether. Compare that to interest on deposit accounts or dividends on shares.

4. Real estate always has a residual value, although prices can certainly fall as well as rise. But property values will never fall to zero unlike shares and hedge funds.

5. Property is a kind of hybrid asset with the capital appreciation of a stock but the income producing capacity of a bond.

6. Investors typically have more control over the nature, timing and size of real estate investments. This is partly because they are tangible and easier to understand, and diversification is readily available in the form of different types of property.

7. Dubai property is open to any investor from anywhere in the world, unlike the local stock market. This means greater liquidity and more funds in the marketplace.

8. Demand for property typically picks up during an economic boom such as the one being seen in Dubai now. With massive projects such as the Dubailand theme park, Palm Islands, and Dubai International Financial Centre coming to fruition, this looks a wise time to invest in real estate.

9. Real estate is always an excellent collateral security against loans, and allows debt finance to be secured at the best rates.

10. Property portfolios offer great scope for diversification of risk into different property types, locations and rental levels. This helps to spread the risk of an interruption to income flow.

Are foreigners restricted?

No, anyone can purchase property in Dubai’s exciting new Developments.

Leasehold or Freehold?

Freehold properties are most commonly available when buying though Link Real Estate. However one might occasionally find a combination of freehold and 99-year leasehold property.

How do mortgages work?

Links Real Estate’s affiliated banks offer competitive mortgages ranging from 10 – 25 year terms. Interest rates are linked to both the US and UAE markets. Feel free to contact us for current rates.

What payments are required?

For Dubai’s new development properties, payments are similar to those in most other countries. The standard minimum deposit is 10% of the purchase price, payable on signing the contract. Afterwards, ‘stage payments’ are made at regular intervals through to completion. Feel free to contact us for the financial obligations on each specific project.

How long is the purchase process?

In general, due to our one-stop shop service, purchases are extremely swift. One can expect them to be completed in as little as 2 weeks.

What taxes must be paid?

Currently, there are no government taxes of any kind when purchasing a property in Dubai. Furthermore, when selling there is no Capital Gains Tax. When the Dubai Lands Department registers title, buyers will pay a 1.5% tax based on the purchase price of the property. If they have a mortgage, they will pay 0.25% of the value of the loan.

Are there Service Charges?

Yes, reasonable service charges are payable to all developers for maintenance, landscaping and refuse collection. This charge varies according to the development.

Does ownership entitle you to residency?

Yes, the Dubai Government issues residence visas to new property owners as well as their immediate family. Visas need to be renewed every three years as per immigration laws.

What is the investment potential of Dubai property?

Very good. Property prices in Dubai have experienced consistent growth, out-stripping even the most buoyant markets and forecast to achieve the same for some time. One need only to compare current prices with those of the last few years. Links Real Estate have the inside market knowledge to know which developments project the most substantial gains.

How is the re-sale market?

The re-sale market is extremely strong and the demand is high for all types of real estate. Furthermore, to facilitate the ease of resale, properties can be sold and the agreement can be transferred to anyone. All the new owner has to do is take over the payments to be made to the developer.

Talk to us today

If you would like to find out more about buying property abroad through Volcano Estates, simply contact us today on (0034) 928-51.87.52, or by e-mail, for an immediate response.