Sunday, 10 February 2008

Buying Property in Dubai to Let

As the property market in Dubai continues to explode, along with the population, many would be investors are eyeing this emirate with extreme interest. If you’re considering buying property in Dubai you are in excellent company, with investors coming from all over the world at the present time, this little region is on fire with growth. Should your intent be to buy-to-let real estate in Dubai however, there are some things you should keep in mind.

Dubai is a popular expatriating, holiday and investment market, but its government is serious about a few things. Just as sure as the Dubai landscape is beautiful, warm and loaded with activities, the government takes its own rules very seriously. In this article, we’ll explore buying property in Dubai to let and one particular practice that could get you in trouble if you don’t know what you’re doing.

To keep renting property in Dubai affordable for residents, the government passed a rent increase cap in 2005. This cap set into motion a 15% price increase limit. This law was further amended in 2006 to lower the cap to 7%. The law was passed in response to incredible hikes in rent in some areas. Residential property tenants were complaining about rises as much as 30% making housing prices simply unaffordable.

Whilst the price controls were put into place to keep living in Dubai at least economically reasonable, some property owners are failing to pay attention to the law. Some are blatantly ignoring the regulations and others are finding ways to circumvent the system.

Wanting to quash overabundant price increases and discourage circumvention of the law, Dubai’s Real Estate Regulatory Agency is now urging renters to turn in their landlords who violate the rules. The Gulf News is reporting that the agency’s head, Marwan Bin Galita, is encouraging tenants to refuse to sign rental agreements that ask for more than 7% and is also asking them to file formal complaints.

With rents and inflation bearing down on the populace, keeping prices in the moderate growth range has been deemed important by the government. Whilst this can make investors a little weary, the controls do make sense on a practical level. If landlords increase their rents too much too quickly, they might just price themselves out of the market.

As Dubai works very hard to establish itself as the world’s new playground, investments here are paying off very well for some. Even with the 7% cap in rental price increases, rental yields are reported in the 10% range in many communities. This is a rather tidy sum for savvy investors to appreciate. Add to this the fact that Dubai’s popularity is ever increasing and the potential becomes even more attractive.

Buying property in Dubai appeals to many investors with a desire for high growth potential. If buying-to-let is your plan, follow the rules and the Dubai government will welcome you. Refuse to do so and your tenants just might turn you in.