Dubai’s property market does not need more regulation, instead investors “need to do their homework”, Marwan bin Ghalita, chief executive officer of Dubai’s Real Estate Regulatory Authority (Rera) told journalists on 10 June.
He added that “10 to 20 per cent speculation is OK – these are the firstcomers that will take the challenge and the risk”.
“The mechanisms developers are putting in [to prevent ‘flipping’, the buying of a property speculatively and reselling it shortly afterwards to make a profit], I think are working,” he said. “At Emaar you cannot sell until 40 per cent of the property has been paid. Also, they will have to pay registration and transfer fees. And with Nakheel they give PDCs [post-dated cheques].”
The Dubai property market is on its recovery after it crashed in 2008, causing prices to plunge more than 50 per cent. Sales in the first quarter of 2013 showed a 63 per cent year-on-year increase, reaching AED44bn ($11.9bn), according to the Government of Dubai Land Department.
Flipping has caused fears the property bubble will be making a comeback, as some analysts say the market may be overheating. In April, Emaar Properties’ Mira development, located near the Arabian Ranches, were quickly put up for resale following the sales event of the townhouses, with owners asking a premium of up to a third of the original selling price.
Alan Robertson, chief executive officer (CEO) of real estate consultant Jones Lang LaSalle in the Middle East, acknowledges that in Dubai “there are some worrying signs of over-exuberance in the market”, though he says the high levels of supply should dampen the potential for rampant price rises. Banks and developers are also more wary of fuelling speculative purchases, he adds.
Buyers looking to acquire off-plan, before a property is constructed, have a guarantee that the projects will be built, as developers are required to fully pay for the land and a 20 per cent construction guarantee, according to Bin Ghalita.
“Developers are not allowed to use money from the trust account until 30 per cent of construction is reached,” he said. “There is a demand. It is now in the hands of the investors.”