Dubai

Why Buy Property in Dubai?

Dubai is rapidly growing in popularity with British second home purchasers attracted by its lifestyle, cosmopolitan atmosphere and sub-tropical climate.

In recent years, prices have increased by as much as 25 per cent per annum, while remaining low by UK standards, and Dubai City has become an international property hotspot. We hope this guide will help you decide whether Dubai is the right location for your second home or investment property. There are many resources to help with further research, including estate agents, television and radio programmes, magazines, the Internet and property exhibitions.

Dubai City – an overview

Dubai City consists of two main areas, Bur Dubai (the older part) and Deira, which faces it across Dubai Creek and is now the centre of the city.

Choosing a home

Since 2002, when, by royal decree, foreign nationals first became eligible to own property, Dubai has enjoyed a construction boom.

Buying a home in Dubai: Purchase procedure

Property ownership

Until 2002, ownership of property in Dubai was restricted by law to citizens of the UAE and other nationals of the Arab Gulf Cooperation Council. Even when this law was reversed, there was, until recently, no federal law that recognised freehold tenure, which meant that the value of Dubai freeholds rested in essence on the country’s international trading credentials and good name rather than on enforceable law.

Foreigners who bought property in Dubai received a deed from the major development companies, which are, effectively, owned and controlled by Dubai’s government and, ultimately, its ruler. New freehold property laws

In March 2006, the Dubai government passed a long-awaited law allowing foreign freehold ownership of property in the emirate, but only in areas designated by the ruler. The property purchase process

Because the international property market in Dubai is still in its infancy, there is as yet no formal purchase process. In the majority of cases, those buying freehold property in Dubai do not incur survey fees.

Financing your purchase

Financing your property purchase in Dubai

When working out how to finance your purchase, consider all the options.

The other options are remortgaging your UK home or arranging a mortgage on your Dubai property through a local or UK lender. Remortgaging offers the easiest solution. Releasing equity in a UK home means that the second home can be purchased for cash, without the need for another mortgage. Several UK mortgage providers will lend funds of up to 80 per cent of the purchase price for second home purchase over, typically, a 15-year term.

Getting a mortgage in Dubai

Mortgages can be difficult to obtain in Dubai.

Dubai lenders do not take into consideration any projected rental income from the property.

Taxation in Dubai

Background

Dubai’s massive oil revenues make it unnecessary for the government to raise income through direct taxation. As a result, taxes are almost non-existent, and Dubai is categorised a ‘no tax’ emirate. There are no withholding or capital taxes.

Accordingly, Dubai does not levy tax on income, including that derived from letting property owned there, nor does it charge Capital Gains Tax. There are no property taxes in Dubai at present.

Personal taxation: non-residents

As part of their worldwide income, British citizens who own a second or holiday home in Dubai are taxed by the Inland Revenue on any income derived from letting it. They may also be liable for other taxes, such as Capital Gains Tax and Inheritance Tax.

Money matters

Dubai’s currency is the UAE dirham (AED). The current exchange rate is 1 AED = £0.15 sterling. The numerous local and international banks offer all the usual banking services.

Passports, visas and residency

British citizens are granted a visit visa, free of charge, on arrival.

Residency in Dubai

Anyone wishing to work, open a bank account or rent accommodation must hold a residence visa.

Dubai’s economy

Dubai is less dependent on oil than the other UAE states. Dubai has built its current wealth mainly on its role as an international focus for commercial and industrial development, investment and tourism, and has become a regional centre for international corporate headquarters and computer and media companies. Fifteen free trade zones are being developed, including the world’s first e-business free zone. Dubai also has a tradition of undertaking vast development projects, which have included the construction of the world’s tallest hotel.

Communications

Telephone

Dubai has an excellent, modern telecommunications system. The Emirates Telecommunications Corporation (Etisalat), which is required by the Telecommunications Regulatory Authority to censor Internet sites, has a monopoly on most business and personal telecommunications services in the UAE. However, a new telephone company and Internet Service Provider, a subsidiary of Dubai Internet City, has recently been launched to serve expatriates who have purchased freehold property within the UAE.

Internet

Dubai has numerous Internet cafés charging reasonable rates.

Post

There are no postal deliveries in Dubai. All mail is sent to post office boxes.

And finally…

Buying a property in Dubai, or anywhere else abroad is a major decision and one that should not be taken lightly. Individual circumstances will vary widely, so it is essential to obtain professional advice and guidance tailored to your particular situation, especially in areas such as property purchase, potential rental returns, taxation and mortgages.