Purchasing a property in the UAE

Question: I have been advised by a friend who has lived in the UAE for many years that the downturn in the Dubai real estate market is reaching its lowest point and it is a good time to buy. However, I am hesitant after hearing some of the stories of property owners who were caught up in the outfall of the 2009 global economic recession. What are the important things I need to check before going ahead with a purchase?

Answer: It is difficult to say what the current real estate situation is in the UAE. Since Dubai's property downturn of 2009, prices have fallen by some 50 per cent, due to a slowdown on sales, and about 50 per cent of all new projects have been cancelled or suspended as demand has fallen.

However, newspaper reports indicate that things may be starting to turn. According to the Dubai Land Department, in the first quarter of 2011 there was a surge in home loans applicants with around 871 mortgages approved in the three months from January 1 to March 31, 2011, a rise of 0.69 per cent on the same period in 2010.

It is true to say that mortgages have become more attractive and competitive since the downturn, with interest rates on mortgages falling from a high of eight per cent in early 2009 to around six per cent.

Prediction

However, no one knows as yet, whether the prices in the property market have bottomed out. There are many developments in Dubai where you can find they type of villa you're looking for either directly from a developer or in the secondary market.

One of the issues you need to examine before going through with a purchase are the property's title deeds, make sure you understand the position regarding registration of the title and ideally have a lawyer check all the paperwork with the Dubai Land Department.

It would also be wise to check with the Real Estate Regulatory Agency (Rera) to see if there are any outstanding complaints involving the property. If this is the case, then you should put the purchase on hold until the issue has been resolved. You should also get a surveyor to look at the property to make sure it is structurally sound.

If the property has a clean record, then you can move ahead with making a decision on what type of mortgage you need. This will include deciding on three key things; the period of time you want to repay the mortgage over, whether you want a fixed or variable interest rate and what percentage of the total cost you want to pay as a deposit.

Determinants

All these factors will determine how much you will have to pay back to the mortgage lender per month, as well as the total repayable amount. It will also impact on when you can capitalise on your investment if you are planning to sell the property at a later stage.

Remember, though, that since the 2009 downturn, banks and finance houses are increasingly examining individual's financial histories, income and future prospects as part of their criteria for offering mortgages.

Protecting your home as an asset is also an important part of the purchase and talking to an independent financial adviser will help you to be as sure as you can that you and your home are financially secure.

If you are unable to meet the mortgage repayments for any reason, such as death or injury, then life insurance and critical illness cover are important policies to consider. Many mortgage lenders in the UAE will insist that you take out life insurance as part of the mortgage deal.

The writer is a Solicitor and Senior Estate Planning Consultant with Nexus Insurance Brokers LLC. If you have any question, please email it to advice@hulfnews.com.