Dubai to crack down on property flipping

Photo credit: Chusico

The emirate's housing market has thrived in the last 12 months thanks to a strong rebound following a severe financial crash. Indeed, proeprty prices leapt more than 30 per cent in 2013, climbing back from a 65 per cent plunge during the downturn.

But that boom has sparked concerns from industry experts that the market could overheat; a similar worry facing London and many other recovering markets.

Mortgage caps were introduced recently to attempt to limit speculation, while Emaar, the emirate's largest developer, has banned flipping of homes. Now, the Dubai Land Department is following suit, planning new rules to protect the housing market from the speculative purchasing of off-plan properties by eager investors.

“Transactions on off-plan properties are a little dangerous,” said General Director Sultan Bin Mejren in an interview with Bloomberg. “We are now studying them and looking at ways to ensure that they don’t hurt the market.”

Buyers usually pay a 10 per cent deposit for off-plan investments and continue to pay throughout construction until a final sum upon the project's completion. But in Dubai's boom years, contracts frequently swapped hands before construction work even started.

Bin Mejren also announced plans to limit rent hikes as well.

“We are studying laws for residential and commercial properties and each will have its own guidelines,” he added. “We expect to have them prepared in either June or the third quarter. There has to be some regulation for new contracts in order to have stable rental increases.”