x Abu Dhabi, UAEWednesday 26 July 2017

Transfer fees on the sale of each property will be four per cent from October 6, double the current rate, as Dubai land authorities seek to protect the market from speculators.

Until now, a tax of two per cent of the value of the property is imposed on the transfer of the unit to a new owner. However, from October 6, that will rise to four per cent.  Lauren Lancaster/ The National
Until now, a tax of two per cent of the value of the property is imposed on the transfer of the unit to a new owner. However, from October 6, that will rise to four per cent. Lauren Lancaster/ The National

DUBAI // The real estate regulator has announced a measure to protect Dubai’s rebounding property market from speculators.

The Dubai Land Department said on Thursday that it would double the transfer fee on each sale to 4 per cent of a property’s value from October 6.

“It won’t affect the health of the market,” said Sultan bin Mejren, director general of the Dubai Land Department.

“On the contrary, it will only stop people from making a quick sale to make a small profit. This is harmful for the market.”

Speculators “flipping”, or selling a property soon after buying it – even before it is built or handed over – added much heat to Dubai’s market before the financial downturn by inflating real estate values, forming a “bubble”.

The transfer fee announcement comes a week after Dubai Land Department reported Dh1.2 billion worth of property sales in a single day – its highest in 50 years.

Sam Wani, general manager of the mortgage brokerage Independent Finance, welcomed the move.

“We have been pushing for measures like this so there will not be a repetition of the excessive speculation that happened in 2007 to 2008,” Mr Wani said.

“Flipping is happening but now not as much as before.

“The regulator is starting to put mechanisms in place. If this fee goes up, it will discourage speculators.”

In the first nine months of this year there have been 44,000 transactions worth a total of Dh162bn, compared with Dh90bn for the same period last year, and Dh145bn for the whole of 2012.

In July, the International Monetary Fund issued a warning about a 35 per cent rise in property prices from the year before.

Harald Finger, IMF mission chief to the UAE, said “action will need to be taken to prevent a bubble”.

Mr bin Mejren said the department’s plans to raise the transfer fees had been set in motion well before the IMF’s warning, and would go some way to solving the issue.

“The Land Department’s mandate is to study and regulate the market, and to solve any problems before they occur,” he said.

“This increase will limit any indications of a bubble happening. It will limit speculation, and it will limit quick flipping.

“We do feel like our decision is in line with the IMF’s concerns.”

Mr bin Mejren said other countries had similar transfer fees. In France, it was 6 per cent, in India 7.3 per cent, while in the UK it could vary between 4 and 15 per cent, he said.

But Mr bin Mejren disagreed with the view that prices are now already inflated.

“We do not agree there’s a bubble right now,” he said. “We feel the market has reached maturity and investment is based on actual projects.

“It is a stable market and the value of properties right now is about right for Dubai. We have strong economic growth, not just in real estate but also in tourism.

“The stability we have now in the market will continue for years to come.”

Mario Volpi, managing director of Prestige Real Estate, said he was not surprised by the move, but it would also affect “end users”, or those who buy property to live in.

“They have been looking into ways of cooling off an overheating market for some time now and this move will definitely cause a reaction,” Mr Volpi said.

“I suppose it is aimed at speculators but unfortunately everybody, including end users, will be affected.

“Other foreign governments or regulators in cities such as Singapore and Hong Kong have, in the past, increased their property taxes to curb their overinflated markets.

“If history is to repeat itself, this move will have a big impact on our property market too, but in time people will get used to the new fees and just get back to business.

“How long this will take is anyone’s guess.”

mcroucher@thenational.ae

* additional reporting by Ramola Talwar Badam