Property flipping has become common practice in UAE and Dubai real estate market and leads to a significant rise in property prices, just after legal approval of new Dubai property law in 2006. In year 2002, State Government announced a new legislation that allowed foreigners to own a freehold property in certain specific areas of Middle East and Dubai. We all know that Dubai has already gain top position among some of the modern cities of this world due to its finest architectural structures, business opportunities and fun and entertainment activities. Allowing foreigners to own freehold Dubai properties drag the number of professional real estate investors and second-home seekers to invest in the asset market of this country. Due to such enhanced interest of investors, the property market showed an incredible rise in property prices around 79%. Analysts predicted that the asset market of this city is severely overheating.
What is Property Flipping?
Property flipping is a term that is widely used in USA to define a process of buying and reselling of an asset on higher prices after making some minor renovation and construction changes in structure. Via property flipping real estate investors become able to earn good profits on their investments. Mostly buyers of real estate properties practice this technique to generate good revenues. Technically the first buyer or the property owner flip property to next buyer and get good profits. In a short, property flipping is defined as the process of buying an asset on low prices and selling it on higher prices.
Effects of Property Flipping in Dubai, UAE
Property flipping badly affected the estate market of UAE and leads to uncontrollable rise in asset prices. Besides causing the price rise, it can also be used for mortgage fraud. It is a common practice of fast growing real estate markets. Most of the professional investors are focusing to earn more profits. It’s natural to make some efforts to maximize profits by making an investment in any business sector. But it can distort the market if there is no check and balance of such activities for long time period. Real estate market of UAE will badly effect if asset prices will show abnormal hikes. This will directly increase the cost of living in this country. Eventually, people and investors divert to live and invest in other cities where they find it more affordable to live and setup their businesses.
Government Strategy to Control Property Flipping in UAE
Government has identified the deadly rate of property flipping practice of UAE assets. It takes major steps to retain its image in the international property market. The first step to control property prices, Government has introduced new mortgage laws to protect buyers. According to this law only registered financial institutions are allowed to lend mortgages. And mortgages are essentially insured to avoid fraud. Additionally, each mortgage has to be registered with the Land Department. Details that are required for registration include the size of the mortgage, the value of the property that is being mortgaged and the complete information about the person who is lending money with complete terms and schedule of repayment. People suggested that real estate investors and property buyers who are buying and selling property within the same year of purchase should have to pay taxes and if a property is present in new under construction projects, they will have to provide complete data about the payment plan of the developer. According to anti flipping property laws in UAE if a property owner or investor is going to sell off-plan properties must provide property registration proof with the Land Department before they put it for resale. Such strict anti flipping laws reveal the high rate of property flipping in Middle East. It is absolutely bad news for speculative investors who only aim to earn profits in every way. In contrast, these new property laws enable the real estate market to regain its health and attract those desperate foreign property investors that have gone away due to such abnormal rise in asset prices. The Middle East is considered among most fertile places across the globe that offers some of the excellent real estate markets like Ajman and Abu Dhabi.
Buying a real estate property with the intention to earn maximum profits in every way put a negative impact on the real estate market and can rip away potential investors. Real estate UAE also faced such circumstances just after enabling foreigners to hold properties in specific areas in this region. But the State Government has taken significant steps to stop such unethical attitude of real investors.