Dubai Doubles Property Transaction Fees

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With Dubai property prices soaring again, the government is doubling the transaction fees for property sales in an attempt to stem speculators and "flippers."

The Dubai Land Department announced at a press conference today that the fee for registering the sale of a property in a freehold zone will rise from 2 percent to 4 percent of the price of the property. The new fees will go into effect October 6.
 
"The decision will limit unhealthy transactions which are harming the market," Sultan bin Mejren, head of the Dubai land department, told reporters.  "The market is recovering and we want to help boost stability and sustainability."

Home prices are up more than 30 percent in the last year in some Dubai neighborhoods, raising concerns that another bubble is forming. Prices fell more than 50 percent after the economic collapse in 2008.

More than Dh160 billion in property has changed hands in Dubai this year, compared to Dh90 billion for the same period last year, according to Land Department data.

While the fee increase may dampen sales in the short term, "it's the prudent thing to do because the more stable Dubai's fiscal situation is, the better the long-term prospects for property values," Digvijay Singh, an analyst at VTB Capital Plc., told Bloomberg.

The fees may not impact speculators, since the transaction charge is not usually paid until a project is completed. Many flippers in Dubai buy off plan and resell before the project is built.

But Mr. Bin Mejren told reporters more measures are in development to control the market. 

The registration fee increase will not apply to industrial and warehouse property.