news image

The dynamics of UAE freehold property

2015-09-02 07:16:25

The UAE freehold property scenario has been under the scanner, with fluctuating prices and incomplete projects.

Victoria Rushton, Senior Residential Consultant of Better Homes, explains that customer confidence remains strong in spite of these deflecting factors.

Victoria Rushton

Factors affecting customer confidence

I feel that consumer confidence has been affected by the media, the economy and the fluctuation in property prices.

During the first quarter of this year, many buyers were holding off as prices underwent a spike after the Expo 2020 hosting bid announcement.

However, supply now has met the demand and prices have experienced a government-assisted correction by way of doubling the transfer fee to 4% and capping the banks’ loan-to-value rates at 75%.

People are still confident enough to buy as rents are still comparatively higher than mortgage installments. I can personally say that there is always a buyer at the right price.

This summer, the general trend was that majority of the clients waited for prices to soften over Ramadan and then snapped up all the great summer deals.

The UAE has invested heavily in strengthening its infrastructure in recent years as it considers how to accommodate the population growth in Abu Dhabi and Dubai, the hosting of the Expo 2020, andhow to position itself as the global shipping and aviation hub.

The estimated value of six mega projects in the UAE’s infrastructure construction sector is over Dh202.25 billion ($55.11 billion), according to a news report.

Buying over renting

Based on my experience, in addition to monthly installments being lesser than rents, many investors can expect capital growth on their investments.

Owners can join homeowners associations, making them part of an organisation that can, in most cases, protect their investments in the long term.

Buying is better than renting when you consider how much you spend on rent over the years versus purchasing the same property.

In addition, with buying, you have a sense of property security. You are moving around less, the investment you put into your home (landscaping, renovations, decorating) is not wasted on improving the landlord’s asset.

While I feel buying over renting is generally the way to go, there are considerations: if there is a dip in the market and you have paid too high, it may be a challenge to flip the property in a short period of time (assuming that was the plan). This may leave you with a property worth less than what you paid for.

For most first-time buyers, the setbacks include finding it hard to save enough for the deposit.

However, with transfer fees doubling and banks setting a mortgage cap at 75%, this may ease the challenge.

A guideline amount to save is 32% to cover the broker fee, transfer fee and developer service charges.

Facilities from the landowners

With a landowner or developer, most recreational facilities include tennis courts, swimming pools, kids’ play areas, barbecue areas, fully equipped gyms, good landscaping, community centres that include convenience-related shops and small groceries, security, rubbish removal and cleaning.

Typically, I have found that the main setback among clients is finding the time to call multiple different banks.

So, I recommend using an independent mortgage broker which guarantees them faster service and the best interest rates.

Furthermore, the broker will do all of the running around, paperwork and submissions related to mortgage pre-approvals.

A good broker should discuss all the hidden costs with the buyer

and demonstrate transparency with all related fees.

Generally, banking fees include average registration fee of 0.25% of the total loan, Dh4,000 administrative fee, a processing fee at the Land Department Trustee Offices and developer service fees. Some developers charge AC district cooling fees in addition to the community service charge fee.

Property indexes this year

• According to the real estate analyst Reidin,the residential property index (RPPI) in Dubai fell by 2.8% in April. After adjusting for inflation, the prices for the residential units dropped by 6.8%. Abu Dhabi also witnessed a drop in RPPI by 1.1%, which accounted for 5.5% after inflation.

• RPPI is calculated monthly. In Dubai, it is based on the performance of seven cities, eight main districts and four mega projects, while in Abu Dhabi, it is based on seven cities and four districts.