As part of our new Sunday Series, every week, we bring you a new expert advice column to make the most of your life in Abu Dhabi. This week, Alan Kaye, director of business development at District Real Estate, tells us about buying property in Dubai and Abu Dhabi and the developers who have set up shop in the UAE.
In the past few months it has been difficult to avoid the advertising of the Dubai property developers who have been advertising off-plan properties in Abu Dhabi.
Some of them have opened their own offices here whilst others are visiting on a regular basis and renting space in the most prestigious hotels.
It is also reported by the Dubai land department that over 23 percent of property sales in Dubai are by residents of Abu Dhabi. So what actually is happening?
To understand this phenomenon it is necessary to look back to recent history to see how the two cities have grown and the concept behind each one. In Abu Dhabi the growth of the city is planned and is following a clear set of guidelines.
All the main developers are effectively government-controlled entities and the basic assumption is that supply and demand will, within reason, run parallel.
This, in theory, ensures a stable market and both developers and end users should benefit as developers will obtain a fair market return on investment and end users will have a steady supply of properties at fair market prices.
It is therefore not a free market in the true sense as it is as such being controlled.
In Dubai, while there is an overall plan, the market is much freer and the philosophy is: “build it and they will come”.
Developers are encouraged to come forward with plans and to build as much as they think they can sell.
This has meant that developers need to constantly innovate not just the actual buildings but also the payment plans in order to encourage investors to continue to buy.
Dubai developers have realised that in Abu Dhabi there is a stream of investors who are not being satisfied by the Abu Dhabi developers and therefore are now targeting Abu Dhabi.
The first question everyone asks is how safe is it to purchase an off-plan property?
We have all heard the horror stories of developers disappearing with funds or of the handover of properties being two or more years late.
The developers and RERA, the Real Estate Regulatory Authority in Dubai, both realised that strict rules and regulations were required if the market was to succeed and now, for instance, all monies are placed in an escrow account and are only released to the developer after inspection by the Dubai Municipality.
Developers too understand the importance of handing over properties on time and are openly advertising when they are ahead of time.
In Abu Dhabi, the municipality has also put in place rules and regulations to ensure that buyers are protected, all monies now having to go into an escrow account.
The market however in Abu Dhabi, for the reasons stated above, is simply not as developed although I can detect change beginning to happen.
The most interesting aspect of buying an off-plan property are the payment plans and one should closely examine the different options.
They can start as low as one percent deposit rising to 50 percent deposit but then can also have a discount on the actual price.
Payments are normally spread over the time of actual building, but with some projects, there is also a post-handover payment plan whereby you can live in the property and continue paying the developer.
At District Real Estate we can advise you of the best options for your particular circumstances.
As with all property purchases, look carefully at what you are buying and decide if it is for an investment or for own use.
The criteria may well be very different, for instance, proximity to the metro, schools and basic shops is very important for an investment property.
Remember also to check the service charges and if they are fixed for a period of time. These can make the difference between a good investment and one that just breaks even.
Properties in Dubai are now often freehold but in Abu Dhabi, at the moment, only leasehold.
Note that owning a property does not guarantee residency although it is possible to apply for a special property owners visa.
Alan regularly answers your property questions in Abu Dhabi World, you can ask for some advice by sending an email to email@example.com. For more information visit districtuae.com