A sign of desperation or rationality? Dubai mulls new fees to curb off-plan property sales
Dubai is considering new fees and restrictions to reduce the immediate re-sale or flipping of off-plan properties, Dubai Media Office tweeted on Monday quoting a report by the International Monetary Fund (IMF).
No further details about the potential fee hike or new restrictions were disclosed.
In a report released last month, the fund urged the emirate’s authorities to introduce stronger measures against speculation in its property market. It warned of an impending property bubble if necessary steps are not taken on time.
Although Dubai introduced a number of steps such as doubling the transaction fee to four per cent and limiting mortgage loans to buyers in 2013, the IMF called for additional regulation to cool the market.
“Our own view is that these measures are good but if you look at what’s happening in the market it’s time to consider stronger measures,” Masood Ahmed, director of the IMF’s Middle East and Central Asia department, said in a presentation.
“Particularly in terms of ways to discourage quick turnaround – what people refer to as flipping of real estate in Dubai.”
Excessive flipping was blamed as one of the main reasons for a crash in Dubai’s property market in 2009. Experts have also urged that the practice should be curbed to ensure sustainable growth.
“As we move to 2014, regulations will have a little more impact and we expect the levels (sales prices) to dampen just slightly but there is still more that needs to be done in regulating the off plan market since that is where the growth is being driven from,” Mat Green, head of research and consultancy at CBRE Middle East told Gulf Business in an interview earlier this year.
“If sales are going to take place during off plan then we could have a higher transaction fee during that period and lower fees after to try and encourage people to hold on to that property for a longer period.
“Ultimately we want to attract long term investors to Dubai, the short term view is obviously a dangerous one because it escalates prices and does not help the market to mature where people are actually coming in, looking to hold a property and benefit from what Dubai has to offer in the long term,” he said.
In an interview with Bloomberg this year, Dubai Land Department director Sultan Bin Mejren said that the authority will introduce more rules to govern off-plan sales in the market after reviewing transactions in the first quarter of this year.
Recent reports have indicated that price growth in Dubai’s real estate market slowed during the first quarter of 2014.
However, real estate investments in the emirate surged during this period.
Investment in Dubai’s real estate market totalled Dhs35 billion in the first quarter of 2014, up 57 per cent from the same period last year, figures from the DLD revealed.
The real estate authority reported that the number of investors in Dubai’s property market had also risen notably.
In Q1 2014, there were around 13,279 individuals carrying out property transactions, up 81 per cent compared to 7,339 during the same period last year.