Property prices in Dubai and some other parts of the UAE are approaching historic highs, but are still largely undervalued compared with other major global markets, experts say.
Dubai has also made huge strides in opening its borders to foreign investment and expatriate workers while the rest of world is struggling, according to Barnaby Crompton, chief executive of Crompton Partners Estate Agents.
People are flocking to the emirate to escape the poor economic and social growth in their own countries, he says.
The UAE property market has continued to recover from the coronavirus-induced slowdown on the back of government initiatives, higher oil prices and other measures to support the economy.
Abu Dhabi recorded 5,472 property transactions worth Dh27.9 billion ($7.6 billion) in the first quarter of 2023, according to the latest data from the Department of Municipalities and Transport.
“It’s never a bad time to own property as long as you can afford the mortgage repayment,” Mr Crompton says.
“It doesn’t matter what you are buying, a one-bedroom apartment in Jumeirah Village Circle or an island on The World Islands, make sure your sums stack up,” he adds.
“Dubai’s real estate market is in its infancy, it’s still prone to large-scale movement, so if it does swing in the wrong direction, you want to be sure you don’t lose your investment by overleveraging.”
People planning to buy a rented property should bear in mind that they will have to give the tenant 12 months’ notice to vacate, he points out.
We asked four property owners in the UAE to list what they wished they had known before buying their homes.
Homeowner 1: Tejas Labhshetwar
The 38-year-old founder and chief executive of Gyanberry, a university admissions and student counselling company in the UAE, recently bought a three-bedroom townhouse in Al Furjan, Dubai, directly from developer Nakheel for Dh2.75 million ($748,800).
“Me and my wife were keen to buy property only from reputed developers to avoid any pre- and post-purchase hassles,” says the Indian, who has been living in the UAE for the past 16 years. He is married and has a four-year-old son.
“Our buying experience was a breeze. We had to visit their office only twice to complete all the paperwork.
“Dubai has one of the most straightforward, transparent and easiest processes in place to buy a home.”
However, he wished he knew more about the mortgage application process and interest rates for self-employed people before buying the property.
Most of the banks in the UAE advertise attractive mortgage interest rates, straightforward documentation and quick approval time, Mr Labhshetwar says.
However, as a self-employed individual, the mortgage process is not as simple and the documentation varies, depending on whether you have a mainland or free zone company, he says.
Other questions asked by the bank included: How long have you owned the company? Are there any other partners or shareholders in the company? Does the company have audited financial statements for the past two years? How much VAT have you filed in the past four quarters?
“Banks ask for subjective documents depending on each situation and the company’s financial health,” he says.
“Hence, the mortgage processing was time-consuming and it took me almost five weeks to get the final approval letter from the bank. Moreover, the interest rate offered was 0.5 per cent higher than the rates for salaried individuals.”
Mr Labhshetwar also wished he had known that the mortgage registration was an additional cost besides the Dubai Land Department fee.
“We did anticipate and budget for the 4 per cent DLD fee. However, the mortgage registration with the Real Estate Regulatory Agency cost us an additional Dh9,500, including the trustee office fee,” he says.
Homeowner 2: Naheed Maalik
The Pakistani entrepreneur, who owns a communications and public relations agency called The Loop in Dubai, bought her first home, an apartment in Dubai Marina, in 2007 after moving to the UAE the previous year.
It seemed like a good idea with the economy booming and sky-high rentals, she recalls. For a few months after buying the apartment, Ms Maalik received numerous offers that were substantially more than the price she had paid for the unit.
“We stayed put. Then the global recession struck and for what seemed like a lot of years, we were stuck with mortgage payments way higher than what we would’ve paid as rent money,” she explains.
“So the one thing we and most buyers would like to know would be if it’s going to give good return on investment and there’s really no guaranteed way of knowing it.”
Ms Maalik, 52, paid off the mortgage on the apartment in 2021 and sold it last year after deciding to buy a new property.
Her reasons included the age of the building and maintenance issues, “relatively higher” annual maintenance fees and the fact that Dubai Marina had become too busy for everyday life.
She bought a house directly from the developer last year in Furjan West for more than Dh3 million.
“My husband and I own the property jointly. We wanted to invest our money in a ‘safer’ ground-based property after living in an apartment for more than 15 years,” she says.
“In an apartment building, you have little control over who you’re sharing the common spaces with and any decline there affects your property value even if your own apartment is in tip-top condition.
“The much lower annual maintenance fee of the new house was also a factor in our decision-making, as we were tired of paying upwards of Dh4,000 a month for maintenance for the apartment.”
Homeowner 3: Alex Malouf
Alex Malouf, a 43-year-old Briton who is the executive director of public relations for a government-related project in the UAE, bought a three-bedroom apartment in Saadiyat Beach Residences on Saadiyat Island, Abu Dhabi, about a decade ago.
He advises prospective home buyers to read all the fine print on a mortgage.
“We had a couple of issues with our bank, given what was promised upfront and what was then delivered, especially on hidden fees,” he recalls.
Mr Malouf also recommends that home buyers ask questions about what is planned for the wider community and get the answers in writing.
“It’s important to know what is going to happen around you and how it’ll affect your family and the property,” he says.
“An example is what schools will be developed, or if any other communities are going to be developed further down the line. This will impact so many things, such as being closer to much-needed facilities, which, in turn, will impact the value of your home.”
It’s also important for home buyers to get a sense of the community.
Read about the location online or even meet potential neighbours if possible, he adds.
“They’ll not only help you get a feel for the place and the people, but you can also ask them about costs the estate agent may not know about, such as district cooling fees. They’ll also give you advice on how well the community is maintained.”
Homeowner 4: Payal Mirchandani
In 2013, Payal Mirchandani, founder and chief executive of children’s products distribution company Pinca, bought a five-bedroom villa in The Villa community in Dubailand.
She bought it as an investment from an individual seller for Dh3.98 million. It had been rented by PepsiCo for 10 years for one of its senior employees.
Ms Mirchandani, a 47-year-old Canadian-Indian, moved into her house in 2021.
She says she wished she had known more about the master plan of Wadi Al Safa 5, where the community is located, before buying the villa.
“Since it was an open desert plan being plotted, we needed to know what was coming up as part of the master plan, so easier decisions could have been made on moving and living, such as availability of schools, gyms and supermarkets,” she says.
“We were living in Garhoud and everything was so close. In 2013, The Villa seemed deserted and we did not know when things were going to be finalised and finished.
“We were new parents as well, so we could not decide at that time if this would be a great community to move into, so we purchased a smaller villa as it was already rented. We figured over the years, we would see how things develop.”
There was no clarity on whether the developer would build a community centre, swimming pool or gym, amenities that “affect the value of the community”, Ms Mirchandani says.
She also wishes she had known how much it would cost to do any renovations or changes to the house, including all permissions from the developer and payments to the developer and government authorities.