Unlike the British housing market which has been suffering since last year, the property market in Dubai has reportedly seen a 79% increase in average prices since January 2007.  This is on top of the incredible gains that the entire market has witnessed since the government announced its intentions to allow foreigners the right to own freehold title to properties on certain specific developments back in 2002.  When this law was finally ratified in 2006, prices surged with increased vigour and led to some analysts earlier this year suggesting that the market was dangerously overheating.

Never ones to rest on their laurels, the Dubai government heeded the warnings and now there are new property and mortgage laws in Dubai that have been introduced to try and curb speculation in the market, and slow down some investors who were seen as responsible for the huge pricing wars as a result of their buy and flip attitude to real estate units in the emirate.

The new mortgage law was introduced first; it was announced in the official gazette in August and will come into effect 60 days following this first publication.  The mortgage law in Dubai has been introduced in an effort to provide greater regulation within the entire market to protect buyers.  Now a mortgage may only be offered by a registered financial institution, and the mortgage must also be fully insured.  Each mortgage has to be registered with the Land Department as well, and the details required for registration will include the size of the mortgage and the value of the property being mortgaged, to whom the money has been lent and the repayment period and terms.

Just as the real estate industry as a whole in Dubai is in its infancy, so is the mortgage market, and rather than waiting until issues arise from non-stable institutions lending money and failing to have the resources to cover their outstanding debts in the face of borrowers who default, the Dubai government has been incredibly astute and swift in its actions of bringing this level of regulation and accountability to the marketplace.  We’re all in favour of their actions.

The brand new property law in Dubai followed hot on the heels of the mortgage law just a week later, it has been put in place specifically to slow speculation right down.  All sorts of rumours were rife in the market in Dubai about what actions the government would finally take to stop investors buying a property in Dubai today and flipping it for resale before completion and reaping a profit whilst inflating market prices.  There was talk that those who sold within a year of ownership would be taxed and/or that developer’s payment plans would come in for close scrutiny and regulation, but the new law avoids these suggestions.  Instead the new property law requires that the sale of all off-plan properties be fully registered with the Land Department before they can be resold.  This has a natural slowing effect on the rate at which any property can be flipped and resold!

The registration information will include the name of the purchaser and the vendor, the value of the property in question as well as its location, any mortgage or payment plan details that are relevant, the payment history and fees paid and chargeable.  Any sale that is not registered will be considered void.  The law will also prevent greedy developers and agents charging their transfer fees which was always a popular trick before to make them even more money!  However they will still be able to charge admin fees but these will be capped and only payable after the Land Department has approved the registered sale.

This is bad news for speculative investors who were raping the market but fantastic and very welcome, timely news for the long-term health of the property market in Dubai.  It is also welcome news for those desperate to get their hands on a home in Dubai who have watched prices spiralling before their very eyes.  Naturally those who like to make fast profits will find new hunting grounds, and the Middle East and UAE in particular makes for fertile ground at the moment with the emergence of attractive markets in Abu Dhabi, Ajman and RAK.  But as these markets have always watched Dubai with a keen eye, perhaps they too will consider protecting their markets from the speculators in a similar way.