Authorities, developers, and property investors spot this as an opportunity to revive a real estate market that has seen its share of turmoil in the last four years, and exacerbated by the arrival of COVID-19 to further disrupt activity.
Ras Al Khaimah’s Al Hamra, the name behind the first freehold development in the northern emirate, recently offered 12-year visas tied to property purchases.
In 2019, the UAE Cabinet adopted the ‘Golden Visa’, a renewable residency visa for a duration of five or 10 years. “Real estate investors can now apply for the Golden Visa if they fulfill certain conditions,” said Shishira Johny, Corporate and Commercial Associate at The Legal Group (TLG).
“According to information provided by TAMM (an online portal operated by Abu Dhabi Digital Authority), the Golden Visa serves as the first step towards attaining permanent residency and foreign citizenship.”
A five-year visa requires an investment of 5 million Dirhams ($1.36 million) or above, while the 10-year version requires investments of 10 mn Dirhams ($2.72 mn), with a minimum of 40% tied to a property.
The standard residency visa related to property investments is issued by Dubai Land Department, on investments of a minimum of 1 mn Dirhams ($272,000) made in Dubai. The cost of the visa would be about 13,000 Dirhams ($3,500) plus and valid for 3 years.
In Ras Al Khaimah, Al Hamra brings that threshold of investment down further. Entry-level investments for the 12-year visa start from 292,000 Dirhams ($80,000).
In Abu Dhabi, a real estate investor is eligible for a 5-year long-term residency visa with a 2 mn Dirhams ($545,000) property investment.
The value of real estate transactions in Abu Dhabi in 2020 totaled $20.1 billion, with 19,000 transactions being executed, a rise of 28% compared to 2019 ($15.8 bn).
This was divided into real estate sales totaling $8.2 bn from 8,000 transactions while mortgages accounted for $11.98 bn.
Sale of lands and buildings reached 25.3 bn Dirhams ($6.9bn) totaling 4,647 transactions with real estate units reaching a value of 5 bn Dirhams ($1.36 bn) through 3,427 transactions.
Dubai’s real estate market has made a “hard landing” but lower prices may be a good time for investors looking to buy, according to Damac Properties.
Hussain Sajwani, chairman of Damac Properties told CNBC’s Hadley Gamble recently that resale units could cost 10% less than a new development at this point.
The market is likely to remain subdued for the next two years as the city recovers from the pandemic, he said.
“I see, still, a soft market for [2021 and 2022],” he said.
A soft market refers to one where there are more potential sellers than buyers — and prices are likely to fall. This is sometimes also called a buyer’s market because buyers have more bargaining power in negotiations.
Consulting firm ValuStrat in January this year reported that Dubai’s residential property prices fell 12.3% from a year ago.
Sajwani said Damac Properties is unlikely to start many new projects in the current environment.
“I am very, very positive on Dubai in the long term … supply will reduce and property prices will come back and come back strong,” he said.
Selling your home
Lewis Allsopp, CEO of Allsopp & Allsopp said his company has witnessed a 38% increase in buyers enquiring on properties for sale and a 21% increase in sales transactions from 2019 to 2020.
Buying has never been more affordable with the increase in loan to value (LTV) brought in by the UAE government as part of the stimulus package teamed with the low-interest rates. He cautions that the LTV increase and low-interest rates may not be around forever.
Allsopp & Allsopp’s annual report shows average sales prices of residential properties increased by 8% when compared to 2019.
“I put this down to an undersupply in a number of communities across Dubai,” Lewis Allsopp said.
The existence of multiple buyers bidding at the same time on well-maintained properties is resulting in the seller receiving a higher amount.
However, there are sellers selling at a loss to move back to their home country or to buy a larger or smaller property here in Dubai,” he said.
“If you are considering selling your property to upgrade, downgrade or release equity, now is a fantastic time to take advantage of the current market.”
To switch lenders now, the UAE Central Bank removed the 3% exit fee and reduced it to 1% of the outstanding mortgage amount or 10,000 Dirhams ($2724), whichever is less.
Savills’ UAE market report shows a key trend emerging in 2020 is the demand for ready units which has outstripped off-plan sales for the first time in 4 years in Dubai.
Steven Morgan, CEO at Savills Middle East said: “Banks have increased their exposure to real estate and the construction sector, and a spike in re-mortgage activity was witnessed due to attractive borrowing rates and other promotional discounts.”