UAE Prices Plummit

While there are still ATMs in Dubai that dispense gold bars, homes there are less gilt-edged. The largest city in the United Arab Emirates (UAE) was recently declared the world’s third most affordable for prime residential property.

According to estate agent Savills, prime property in Dubai averaged $600 per square foot in June; of the world’s major cities only Kuala Lumpur and Cape Town were cheaper.

A combination of poor economic data, property market reform and oversupply saw prices in Dubai fall to almost 30% below their 2014 peak at the beginning of this year, according to online property portal Bayut.

A slide in oil prices in 2015 sent Dubai’s wider economy into a protracted slowdown. Tensions with Iran and the UAE’s regional embargo on Qatar from 2017 reduced trade and compounded the city’s problems. Further, a new 5% sales tax at the beginning of 2018 harmed Dubai’s attractiveness as a tax-free centre.

However, many involved in Dubai’s property market trace its downturn back to 2013, when the government’s Land Department took action against so-called “flippers” — speculators who buy and then rapidly sell properties.

A new transfer fee increased the cost of buying, while the introduction of a mortgage cap tightened borrowing rules for expats. The effect was to dampen prices.

“For any purchaser the transfer fee was doubled to 4% [of the sale price] and, with the legal mortgage cap, it combines to make a perfect storm that, along with oil price fluctuations and the dollar [to which the UAE Dirham is pegged] becoming increasingly expensive, made the market look comparatively expensive,” explains Murray Strang, head of Dubai operations at Savills.