In a move targeted at dissuading property ‘flippers’, the Dubai Land Department has announced that property transaction fees levied during a registration will be doubled from two per cent to four per cent, effective from October 6.
Dubai’s real estate prices have faced increased scrutiny since the global economic crash in 2008, when the emirate’s property prices slumped by up to 60 per cent.
Officials have since promised stricter regulations and controls to circumvent a new property bubble. The increased fee will be shared between the buyer and seller.
“Although all property markets globally need an element of speculation to fuel developments and investment, it is felt that in Dubai the balance between buyers who are end-users and buyers who have entered the market as short-term speculators is askew,” said Nick Maclean, managing director, CBRE Middle East.
“This scenario could lead to affordability issues over time.”
Though welcomed by many, there are also concerns that the move could stymie the growth of Dubai’s property market, which has begun a tentative revival.
According to figures released by the National Bank of Abu Dhabi, the average property selling price in Dubai was Dhs1,099 per square foot in June 2013, a 34.6 per cent increase on June 2012.
Along with rising rents, Dubai has also begun to see strong investor interest with many of its newly launched properties being sold out on the first day, resurrecting fears of a second property bubble.
According to the latest data from the Dubai Land Department, transaction values have exceeded Dhs160 billion so far this year, up from Dhs90 billion for the same period last year.
Sultan Butti Bin Mejren, director general of the Land Department, told reporters that the latest fee was expected to purge Dubai’s real estate market of unhealthy practices.
He also added that the property fee, despite the recent increase, is still low in Dubai, compared to other markets across the world.
However, an online poll conducted among Gulf Business readers revealed a contrary sentiment on the ground; 45 per cent of readers said that the recent increase will hinder legitimate owners from selling instead of reducing the practice of flipping.
The government has recently adopted a number of measures in an attempt to bring stability to its property market.
The emirate’s real estate watchdog Rera announced that it would penalise brokers cold calling developers and owners whose properties are not on sale, while official news agency WAM reported a decree by Dubai’s ruler Sheikh Mohammed bin Rashid Al Maktoum to establish a new rental disputes settlement centre in the emirate as part of the Land Department.
It remains to be seen whether the raft of combined measures will help to quell Dubai’s rapidly heating property market.