Dubai property agents are rushing to complete sales before fees double next Sunday.
Stampede to complete Dubai property deals before transfer fees double
Property brokers are predicting a rush to seal deals this week before transfer fees double in Dubai next Sunday.
The Dubai Land Department’s new policy, which is targeting the property flipping that can sometimes inflate real estate bubbles, is putting pressure on agents to close sales ahead of schedule. Sunday is the first day the regulator will be open since it announced the fee rise on Thursday.
Other deals that rely on mortgages, which require extra time, are in danger of falling through as buyers and sellers bicker over who pays the extra fee – an extra Dh50,000 for a Dh2.5 million Dubai apartment or Dh120,000 for a Dh6 million villa.
“If people have signed the MoUs and they are not under mortgage, everybody will be rushing to finalise this week,” said Ghada Ghannam, a senior residential agent at Better Homes. “This was a shock for everyone.”
Two of her signed deals, one for Dh2 million and the other Dh1.6m, are on hold because they cannot be completed within the deadline.
“Between the seller and the buyer, they’re confused about who’s going to pay the 2 per cent,” she said. “I wish they gave us at least one or two months’ notice.”
The fee increase comes as prime house prices in Dubai rise at a faster rate than any other city in the world. Dubai prices increased by 21.7 per cent over the past year, helping to push world prices up by 2.4 per cent, or their fastest rate in three years, according to the property broker Knight Frank.
The increased fees will create a massive windfall for the emirate, where in the first nine months of this year, 44,000 properties worth a total of Dh162 billion changed hands, compared with Dh90bn in the same period last year.
The IMF warned in July that “action will need to be taken to prevent a bubble” and suggested targeted rises in property-related fees.
Norms about who pays Dubai’s transfer fee vary; some buyers absorb the whole fee, some split it with sellers, and some use it as a bargaining chip in price negotiations.
“It is likely to be the consumer that will end up paying for this, as the seller will no doubt push prices up,” said Mario Volpi, the managing director of Prestige Properties, a Dubai-based broker. “It’s a short-term fix for a long-term problem. Dubai is keen not to create another bubble and not a bubble that will burst again.”
Buyers could start looking outside Dubai, warned Almer Agmyren, the managing director of Rex Real Estate in Abu Dhabi.
“It might dampen the buying, and buyers will start to look at other emirates when making informed decisions on where to buy a property as the costs of homeownership is increased,” he said.
UAE officials have previously taken steps aimed at minimising risks stemming from the property market. The Central Bank has drafted loan-to-value limits on mortgage lending and announced plans to control bank lending to government-linked firms.
After the global financial crisis of 2008, property prices in Dubai fell by more than half from record highs.