Dubai: Give property buyers some space and they will start to take the hiked registration charges in Dubai — from 2 per cent to 4 per cent which came into effect from October 6 — in their stride. At least, that is the sum and substance of what market observers are forecasting.
“There haven’t been any transactional activity drop as such after the announcement [late last month],” Yash Shah, sales and leasing manager at SPF Realty, said. “The market will soon absorb the new regulations and move forward. It just needs some time to sync in the market.”
But that, to put it bluntly, is the crux of the issue. Will the hike go far enough to slow down the pace of increase in activity in key freehold locations of Dubai?
There was some talk about the momentum tapering off slightly once the wave of buying spurred by the Arab Spring subsided. That never happened, as the last two quarters saw a surge in transactions, as recorded by the Dubai Land Department (DLD). Property value gains are still sticking to the double-digit percentage growth during the same period.
According to top DLD officials, the hike will go far enough to cool down “excessive” speculative buying and selling in the chase for a quick profit taking. At the same time, they also make a point of emphasising that local registration charges are still much lower than in most mature real estate investment destinations.
More measures likely
“Of course, the idea is not to restrict the market altogether but allow a slower rate of increase,” Robin Teh, country manager at Chesterton International, said. “There might be more measures being introduced as the months progress.”
While cash buyers can take increased transaction costs in their stride, it may be less so for mortgage-backed buyers. There are still concerns over the loan-to-value (LTV) upper limits that the UAE Central Bank might impose shortly, forcing buyers to put up more equity as down payment.
That plus the doubling of the registration charges now will mean a sizeable funding commitment upfront.
But Shah reckons that the market and its buyers just need some extra time to adjust. He says the registration charges will be shared by the buyer and seller, which is the norm now (even though the regulations place the onus on the buyers alone.)
“The raised fees will be equally shared by buyers and sellers, so I don’t see a need for investors to talk of the sudden hike in fees,” Shah said.
“Once the market syncs with the new changes, there won’t be any correlation between the higher transaction charges and a slower growth in property value gains.”