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As an expatriate in Dubai, how do I get a mortgage?
Prior to the market crash of 2008, it was fairly easy for expats who had a high credit rating to obtain a mortgage in Dubai which covered nearly 90 per cent of the property cost.
However, since the recession happened, banks have tightened their lending procedures. Now, it is not unusual for buyers to have to put down between 20 and 50 per cent of payment for their property in cash.
Furthermore, many are struggling to get approval at all. For those that do, expats find that there is often more red tape and paperwork than they would have to contend with back home. Some mortgage lenders even require collateral in the form of another property. This precaution is taken as a result of past instability in the region.
See related mortgage story: Of mortgage and standard variable rates
Expats need to present lenders with the following documentation: passport and copy, proof of residence, proof of address, salary certificate or evidence of regular income, and bank account statements for three to six months.
Mortgages are paid back in monthly instalments, with 15-year plans being the most popular. The maximum length of a mortgage plan in Dubai is 25 years. Mortgage repayments, combined with any other monthly expenses, must not exceed 35 per cent of one’s net monthly income, and the total mortgage amount is limited to a figure no more than 60 times the monthly combined household income.
Can I buy property anywhere in Dubai?
For a non-UAE national, freehold and leasehold sales are restricted to specific areas. Freehold ownership entitles the buyer to a lifetime of ownership, granting the legal right to sell/ lease or rent out the property. The terms are not without legal obligations and the decision to invest will require a big financial commitment. But still, there are a few things far more important about your home than whether it is freehold or leasehold. The most blatant difference between the two is clearly control. Freeholders have more control over their property than leaseholders. When buying property for the first time, ensure that you research and investigate on the community and neighbourhood; focus more on a location which meets your budget; hire a full-time, experienced realtor and secure pre-approval in case of bank financing. Also, be careful when buying off-plan property. Ask yourself if you will live in it, or if it is for rental investment or capital appreciation.
Is this the right time to invest in the Dubai property market?
This is a great time to invest in the Dubai property market. But the real question is: when to take the plunge? In the last couple of months, the primary market has become very competitive. The verity of offers from developers has made it lucrative for buyers to become more active and hunt for the best options. This year’s price softening has been welcomed as it has allowed the market to catch its breath and realise that the residential sales sector represents good value once again. There are more attractive and easy payment plans. The UAE property market is more mature than it was from 2009 to 2010 when the rampant flipping of off-plan units created a false market. Recent population growth has been strong and Dubai will continue to attract new residents. Making decisions at the right time is difficult, but your decisions will determine your success. Thorough research and careful planning are key.
What will be the return on investment when buying property in Dubai?
Dubai’s rental yields are averaging over 6 to 7 per cent net after community charges and all – pretty much attractive. These are higher than those of Hong Kong, Singapore and London.
In some parts of Dubai, the yield can be as high as 10 per cent.
The reason for these growing yields is that while we have seen a cooling of sales prices, the rental market has remained broadly robust.
The reality is that residents still need somewhere to live. Coupled with the increase in population due to job creation, it means that renting continues to be the first choice for the majority of Dubai residents.
There are also a few projects in the market where developers are now offering guaranteed rental income plans to attract global investors.
This allows investors to receive 8 to 10 per cent return a year for the first few years following the handover of the units.
Is it good to invest in hotel apartments?
Even in a negative market situation, a high-yield option is a hotel apartment. Today, it’s all about identifying high-yield opportunities where a sound return on investment with a long-term play is an asset. According to the Department of Tourism and Commerce Marketing (DTCM), 13.5 million tourists visited Dubai last year, a year-on-year increase of 8.2 per cent and significantly higher than the global average of 4.7 per cent. Another positive factor is Dubai’s hosting of the Expo 2020, which has prompted huge investment in leisure and tourism infrastructure. Last year, the emirate had 88,000 available rooms set to grow between 140,000 and 160,000 by 2020. If Dubai’s tourism sector growth forecast is anything to go by, high-end hotel apartments will win out over conventional property, with inbound visitor numbers set to increase to 20 million by 2020 as Dubai looks to achieve a Compound Annual Growth Rate (CAGR) of 7 to 9 per cent in both leisure and business visitors.
More on investment: Be sure of your investment
Source: Faisal Ahmed, Special to Properties
Senior Sales Consultant, Candour Real Estate