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Although the Dubai property market remains on the up an up the profile of investors seems to be changing. Most articles you will read in the local Press refer to there being less flipping speculators (investors who resell or "flip" their property in a short period of time) and more end users who are looking for long term investment or sole residence purposes. This new breed of investor normally requires finance however most of them fail at the first hurdle when securing their dream home since they omit to make the correct provisions in advance. You can be a cash buyer too but it takes a little preparation. There is no point looking at property until you have your financial house in order. What you would like to buy and what you can ACTUALLY afford could be opposite ends of the spectrum. So, it is important to determine your financial options prior to engaging the services of a real estate agent otherwise you could be wasting not only you're their time but theirs as well. Too many times, we are asked to arrange finance in the blink of an eye because that "to die for" villa has just gone on the market and there are lots of other interested parties too ready to go (i.e. they have already got their finances in order). Invariably, finance cannot be arranged in sufficient time and the golden opportunity is missed. When buying property, a good agent will always ask whether you are a "cash buyer" or not. Flipping speculators are cash buyers and as such can move quickly. You can be one too if your finances are dealt with well in advance. This can be achieved by considering the following points:- Finance - Mortgage choices in Dubai are somewhat limited and compared to international providers not that competitive. You may consider taking finance elsewhere with a view to borrowing less in the United Arab Emirates. You may have assets elsewhere (property, investments) which can be used as collateral in order to raise finance. If you do not have assets elsewhere then you are limited to the choices that Dubai lenders have to offer. Bearing in mind that only about 50% of the projects in Dubai are financeable, you have to choose your lender carefully. It is anticipated that when the Dubai Property Law comes into effect that more banks will enter the market which will in turn create more competitive finance options, flexibility and charging options. If you visit a Mortgage Broker well in advance of your property search then the budget can be determined. All the options of local and international finance can be explored, the deposit anticipated and the overall costs to get it all together. Locally the Broker can assist you with locating the right company and discuss your overseas options of finance too. A general rule of thumb for overseas property, is that 80% of the value can be released less any outstanding debt. For example, a £1m house in London with a £400k mortgage outstanding could create £400k worth of equity to spend elsewhere. If you brought that £400k to Dubai to purchase property, not only would you benefit from a favourable exchange rate at present but in effect borrow from less than competitive local lenders too. With all the information onboard and all avenues discussed, the Broker can obtain an agreement in principle (Pre Approval) from a suitable lender(s) which can then be passed on to you to hold when viewing property. When you find the one you want, you are ready to move on it straight away. Deposit - Do you have sufficient to meet the lending requirement? All lenders offer different LTV (Loan to Value) depending on the type of project, term of loan, purpose of purchase, nationality and residence of the purchaser. Once again, the deposit could be financed by a loan or existing assets elsewhere. Do you have to sell other assets to realise the deposit and what is the timeframe for securing the sale? Remember the deposit is key and you would be foolish to offer any Realtor a holding fee for a property unless you have this in place. Remember a non-refundable booking/security/deposit fee is non-refundable - less than scrupulous Realtors make money this way so do not be pressured in to parting with money you cannot back up. Offshore Company - When purchasing in the United Arab Emirates, investors should be aware of the local legal system. Shariah Law has specific guidelines on inheritance in the event of death regardless of your nationality or beliefs. For example, the same is true elsewhere in the world and if an Emirati with property in London were to die, he would be liable for 40% UK Inheritance Tax. So, ensuring you have structured your property purchase correctly is essential well in advance again. Similarly, obtaining finance using offshore structures can limit your options so the balance of protecting ones estate and getting the loan has to be considered carefully. Similarly, very few realise that while there is no Death (IHT) or Capital Gains Taxes in the United Arab Emirates you could be liable for the same back in your home country. For example, if you are resident in the UK then you would be liable for Capital Gains Taxes when selling Dubai property and regardless, if you were born or have been living in the UK for more than 17 years (Domicile/Deemed Domicile) then you would be hit for IHT in the event of your demise. Fees - Most Brokers will charge between 0.5% to 1.5% to arrange finance subject to a min fee of $1500. Whether you think this is good value or not, trying to navigate your way around the ever changing paths of local finance houses is a nightmare and you are better getting someone to do it for you. You should also be aware that lenders locally will charge for arrangement fees, they charge for their insurance, there could be valuation fees, there are agent's fees, and there are Transfer fees. With Transfer Fees ranging from 1-8% depending on which property your purchase, establish early on how much they are and whether you or the seller are paying them (why not share?). Make sure you have a full break down of what you are likely to pay since this needs to feature in your mortgage calculations above. Insurance - You may have Life Insurance (no one has enough) but may have omitted Critical Illness Cover i.e. if you are incapacitated and unable to work, the mortgage still has to be paid. Perhaps you do not want to opt for the Lenders insurance policy since you do not recognise the underwriters (the folk who are supposed to pay in the event of your death). If you opt for more main stream providers then this needs to be done in advance again in order to arrange medicals etc. Determine what insurance the developer offers in the case of building guarantees and when are they likely to expire. Regardless, the Press has reported spates of burglary in some of the newest developments; get Home & Contents cover too. Legal - When buying property and thereby increasing the Family Estate it is a good time to revisit your legal stuff. Find your Will, if you have one, and make sure it is up to date. You should have a Will for every jurisdiction in which you have assets. Particularly in Dubai, you should have one translated into Arabic and attested if it is going to have any chance of being processed effectively through the Courts. Similarly, having an Enduring Power of Attorney (EPA) between Spouses is a very useful legal instrument should an event occur again that does not necessarily result in Death. It legally allows either the surviving Spouse or Executor to manage your affairs since your incapacitation through sickness or injury prevents from doing so yourself. Ultimately, get legal support when buying in Dubai - you would do it anywhere else wouldn't you? In summary, if you can run through these items either independently or with the assistance of a Broker then you are better prepared to delve into the Dubai Property market. A good real estate agent will be able to guide you through all these items or at least point you in the direction to obtain professional help. Moreover, it is in their interest for you to do so since their remit is to make the sale. If you are a "cash buyer" or indeed armed with a "Pre Approval" then you can be assured of their best attention at all times. Happy house hunting!
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