Did Dubai burst the bubble?
The second Dubai property boom looks to be over this week before it has hardly started with a doubling of real estate transfer fees by the Dubai Land Department. The sector has only had one week’s notice of the rise meaning that many transactions involving mortages may now fail entirely, stalling the whole market.
Estate agents say that one or two months’ notice would have been far less dramatic in impact. Housing markets tend to take a long time to build up speed but can be brought to a halt overnight as Dubai discovered in late 2008. In the year that followed prices dived by 65 per cent.
Global No1 again
The present Dubai real estate market is not nearly as superheated as back in 2008 when it was a nasty accident waiting to happen. But it has been the fastest rising property market in the world for residential prices and rentals over the past year.
The Dubai Real Estate Regulatory Authority has introduced many new laws, in particular to protect off-plan buyers from scams that were common in the last boom. That has kept new property launches to a steady flow rather than a giant innundation.
RERA is also doubtless a driving force behind the doubling of transfer fees from two to four per cent. This makes it expensive to ‘flip’ property bought off-plan and so dampens such speculation which was one of the main causes of the last bubble.
However, the authorities should also be careful not to slay the goose that lays the golden egg. Global property markets are already under pressure from rising interest rates as the Federal Reserve’s hold on bond markets has slipped over the summer. Higher borrowing costs are never good for real estate and often extremely bad news.
Rush to beat deadline
Still Dubai realty has the world’s biggest tailwind behind it and should logically therefore be the last to slowdown, or at least it would have been without the doubling of transfer fees from this coming Sunday.
There’s been a big rush to get title deeds before the deadline but many juggling mortgage applications just won’t make it.
Take those buyers out of the market – and the percentage of transactions using mortgages shot up in the second quarter – and Dubai real estate may have a problem. Extending the deadline would make a lot of sense.
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