With the rising cost of rentals in Dubai, and a healthy property market that looks set to continue growing, buying property is becoming an increasingly attractive prospect for expatriates looking to lay down their roots in the UAE. Helen Tatham, managing partner of Prime Places, tells Benchmark about the purchasing process, the important criteria every house hunter needs to know and how to get a mortgage as an expatriate.
Q: With housing rents and prices in the UAE continuing to increase should expatriates consider taking the plunge and buy a home?
If one’s personal circumstances are such that, firstly you can afford to do so, and secondly, you are planning to stay in the UAE for next three to five years, then yes, absolutely. Sales prices have gradually dipped over the past 12 months, which is construed as being a correction following the inflated prices preceding and around the Expo 2020 announcement, bringing them down to a more palatable level. One certainty is that rent values are high, making it a very expensive place to live as a tenant.
Q: Does it make financial sense to buy now instead of rent?
On the basis of securing a 25-year mortgage at an interest rate of 3.9% p.a., calculations dictate that it is cheaper to pay off a mortgage every month than to rent in the “mid-income” areas of Dubai. If your company is paying the rent then it may not be such an issue but even so, why not invest in another yield-producing property as an investment and benefit from a capital gain over the next three to five years as well?
Q: What are the logistics of doing so?
The first task is to make sure that you qualify for a mortgage if you need one. A good mortgage broker is the ideal route for this as they will help you identify the bank best suited for your circumstances. Once you are sure of what you can afford then find a good and trustworthy real estate company to show you some properties within your price range. Sellers will not entertain offers unless the buyer is pre-approved (if financed) so make sure to be in this position. Successful negotiations will take you to the stage of signing a sales agreement and putting down a 10 per cent deposit. The nature of the contract will depend upon whether the buyer and/or seller are financed but the longest it should take to acquire the property is 8 weeks.
Q: Where can non-GCC foreigners actually buy?
All Freehold areas come under this banner whereby a non-national can own property 100 per cent registered in their name. The major master developments in Dubai include Downtown, Dubai Marina, Palm Jumeirah, Emirates Living, Dubailand, Jumeirah Village, Mohammed bin Rashid City. Some projects only grant Leasehold ownership, such as The Green Community.
Q: What tips would you give to buyers here?
I would advise buyers to do their market research before committing to a purchase. The system is fairly straightforward in the UAE but even so associated costs are not insignificant and it would be annoying to make the wrong decision. Location, community costs and build quality are amongst the main considerations. With new infrastructure appearing all the time, make sure that you won’t suddenly be subject to a change in landscape on your doorstep. Find a reliable and credible real estate agent to guide you through the process because, even though you might find the home of your dreams, it is essential that your buying experience is managed properly and that all due diligence has been carried out on the property in choice.
Q: Any hidden costs such as annual facility management fees that buyers need to be aware of?
All costs are there in the public domain but clearly one should request this information before committing to a purchase. Service charges are set by the developer, until such a time as Home Owner Associations take more control. An additional cost could be District Cooling but not for every project. Deposits will be required for the registration of all utility accounts.
Q: What are the financial loan options for those who need a cash influx before buying?
Borrowing is fairly fluid at the moment for residents of the UAE as long as one is in secure employment and has been for more than six months. The mortgage cap introduced in December 2013 has had an adverse effect on the number of transactions and achieved its objective to cool down prices. For properties valued at less than Dh5million, one can borrow up to 75 per cent of the purchase price and for over Dh5million this reduces to 65 per cent. The deposit required plus the associated fees of near to seven per cent will pour cold water on some peoples dreams but we are hoping to see a relaxation of this at some stage, particularly for first time buyers.
Q: Where are the most attractive options to invest in a property?
The most attractive areas to live are generally the most expensive. End users will pay for infrastructure and amenities and there is a natural draw to those developments within easy reach of schools. For pure investment or value for money then the emerging areas of Dubai are of the most interest. These include Dubai Sports City, Jumeirah Village, Dubailand and now off towards Dubai World Central in the run up towards Expo 2020 and the new airport. If one can use their imagination then the benefits will be reaped in the years to come.
Q: How much can residents expect to pay out for an annual mortgage repayment for, say a two-bedroom property in Dubai?
Going on the general gauge of a 25-year mortgage at 3.9% interest p.a., monthly repayments will cost approximately between Dh10,000 to 11,000 and therefore up to Dh132,000 p.a. A two bedroom to rent in an equivalent area could cost up to Dh160,000 p.a.
Q: Are buyers now more end-users rather than investors?
There are a lot more end users now. The philosophy of expatriate residents in the UAE has changed over the years to one of longevity. It is not so transient with contracts of two or three years. Today’s residents see the UAE as a home for the longer term and therefore are more comfortable with investing in that future. But for the same reason the investors continue to add acquisitions to their portfolios, recognising the upside of buying into a market where future demand will remain strong, plus achieving stronger yields typical of an emerging market than they would achieve in other global centres.
Q: Is Dubai is now increasingly being seen as a place you can base yourself long-term?
Dubai welcomes talent and inspiration, and as such makes it a very accessible to live and work. The lifestyle is second to none and it’s difficult to find a suitable comparison in other global hubs. I think that with the amazing connectivity, new schools, an international financial centre and a cosmopolitan culture, the UAE will become a long-term post for families and many people from different walks of life. It is a place that is difficult to leave with so much to offer and the added incentive of a great investment opportunity within the property market.
Q: How do you envision the real estate market to progress?
I think that the real estate market will continue to boom in the long term. We had a rough ride through 2009-11 but a lot of good came out of it in terms of better regulation and less speculation. The Government will support the growth and stability of real estate as has already been demonstrated. I think that the onus is on the investor and developer not to overstretch themselves which is why we witnessed so many default situations in the downturn. There is a debate of oversupply but it has also been acknowledged that there is a desperate need for affordable housing, the inventory of which will be swallowed up for sure. Capital values are still reasonable compared to more mature markets and there is a strong attraction for the wealthy to position their residency within the UAE. I cannot see any of this changing within the realms of what we can control but external factors will always remain a threat to any country. I feel that the real estate market will continue to evolve into one of the best in the world, within a country with a great future founded on its geographical positioning and entrepreneurial spirit, attracting the best of the best people in the world.