Dubai is considering introducing new fees and restrictions to stop flipping of off-plan properties, the International Monetary Fund (IMF) has said.
“Imposing additional fees and restrictions on reselling off-plan properties, as currently under consideration, would further discourage speculative demand,” the IMF said in a new report.
“The increase in Dubai’s real estate registration fee from 2 to 4 per cent last October, along with regulatory measures to assure orderly market conditions for new real estate development, was a welcome step,” it added.
International experience shows that countries faced with real estate booms often repeatedly raised real estate fees and differentiated them by criteria such as the buyer’s residency, use of the property for occupancy or investment, or the time elapsed before reselling, with rates reaching up to around 30 per cent for selected types of properties resold within a year (Singapore).
Although it is not known on what measures the Dubai Land Department (DLD) is planning to introduce, market participant say the introduction of a slab-wise registration fee is likely.
DLD, however, did not respond to queries from Emirates 24|7.
“The plan to introduce new measures/fees on a sliding scale is a good move. This is what the market needs as we see speculative activity,” Craig Plumb, Head of Research, JLL Mena, told Emirates 24|7.
“Property prices are going up, driven mostly by speculators in off-plan projects.
“We need more regulations to discourage speculators,” he added.
Although Parvees Gafur, Chief Executive Officer, PropSquare Real Estate, said the new fee would be good for the market in long term, he believed that the market was no longer driven by speculators but by the end-users.
UAE developers have imposed self-restrictions with major developers such as Emaar Properties, Aldar Properties and Nakheel not allowing an investor to sell a property unless they have paid 40 to 50 per cent of the property value.
(Read: Major UAE developers team up against flippers)
Earlier this month, the UAE Central Bank said that low residential rental yields in Dubai and Abu Dhabi possibly indicate growing imbalances and overheating in the real estate sector.
“Current average rental yields in Dubai and Abu Dhabi are approximately 70 and 130 basis points below historical averages, which could indicate growing imbalances - overheating real estate market,” the Central Bank said in its financial stability report 2013.
Global Property Guide, a UK-based research house, said on Sunday that Dubai has topped the list of house price survey for the fifth consecutive quarter with house prices rising 31.57 per cent during the year to Q1 2014 and 9.58 per cent in the first quarter alone.
(Read: Dubai property prices up 32% in 12 months)