Key Steps in Buying Properties in the UAE

After the 2008 real estate crash, confidence is once again returning as property prices see some recovery and the emirates announce their commitment to real estate through the launch of several new major projects plus the resumption of activity on stalled ones.This confidence has also been fueled by the introduction within the UAE of a number of new laws to protect investors of property. This does not however guarantee that the purchase of property in the UAE is without its pitfalls so Caveat Emptor ("buyer beware") still applies. What you buy is important. Where you buy is even more so. That's why the first rule of real estate is: location, location and location. Carefully consider things like the developer, the neighborhood and the distance to amenities like shops, schools and parks. These factors will not only help you live more comfortably, but will have a big effect on your property's sale and rental values in the future.

Step 1 - Working out what you can afford
Buying a property is likely the biggest single purchase you will undertake, involving a substantial long-term financial commitment, so think hard about what you can afford. You will need to consider the assets you have - like savings - as well as the money that's coming in and going out.The UAE central bank has provided guidelines to the banks limiting their ability to lend i.e. the monthly financing charges can as a maximum account for 50% of the monthly income. Although it may reduce your buying options further than what the banks would be willing to lend, you don't want to commit to a mortgage and then realise you can't afford some of the nicer things in life! It may sound obvious but take time to think of all the things you spend money on throughout the year, even without a mortgage.

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Set out your annual budget to help you determine what you may be able to afford on a new mortgage which could save you a lot of time and pain in the long run.

Once you know what you are able to pay back on a mortgage each month you can use our Mortgage Calculator to find out what total mortgage amount your monthly payments could represent.

When considering what you can afford it is important to take into consideration all the additional charges that has to be paid:

Real Estate commission - whilst there is no law covering this charge it is generally set at 2% of the purchase price
Land Department Fee - this has recently been increased to 4% in an attempt to reduce speculation
Mortgage Upfront Fee - this varies from mortgage providers but would be included in the mortgage  

“Generally, the best mortgage deals are available to people who put in a large deposit.”

Step 2 - Getting a mortgage
For most people buying a property the biggest ongoing cost is the mortgage repayments. You can't sell the property without paying off the mortgage first and if you don't keep up the repayments the lender can repossess the property.It is advisable to get a Mortgage in Principle from your chosen lending institution before starting the searching process. This way, when you find the right property, you will avoid being beaten to it by another buyer and you will also be in a much stronger negotiating position.Generally, the best mortgage deals are available to people who put in a large deposit. The UAE Central Bank has recently increased the minimum deposit to 25% of the property's value, leaving the mortgage company to lend the other 75%.

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Use our Mortgage Repayment Calculator to find out what the ongoing monthly repayments on your mortgage are likely to be.

Finding a mortgage
Firstly, get a rough idea of what's available. You can use the following website to help you have an overview of the current offers:
If you already have a relationship with a bank see what they have to offer.
If your circumstances or the property you want to buy are unusual it may be worth asking a mortgage broker who can help.

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While a lender will happily work out what they think you can afford, remember you need to be comfortable too. Make sure you will be able to deal with unexpected extras that crop up. Key questions to ask yourself are:

 - Can I continue to live the lifestyle I want if I were to take on this mortgage?
- What if my circumstances change, for example if I want to take a career break to study, have a child or have to look after a sick relative?
- What would happen if I lost my job?
- What would happen if interest rates went up?
- If any or all of these things happen could I still keep up the mortgage repayments?

Budget for rises in interest rates - for example, for every 1% increase in the interest rate on a AED1,000,000 mortgage the interest payment alone jumps by around AED833 each month.

Choosing a mortgage
Once you have read through all the mortgages on offer, you are ready to compare mortgages. Here are some tips:
If you've got quotes from different lenders make sure you compare them on a like-for-like basis looking at payments, charges and flexibility.
Ask about the term of the mortgage. Most mortgages are 25 years in length, but you can choose a longer or shorter period if you wish, depending on what you can afford and how quickly you want to be debt free. Bear in mind that UAE mortgage providers will not provide a mortgage period that will extend past your retirement age.
At the end of any special offer periods, you may be switched onto the lender's standard variable rate. So at the end of the period, remember to ask your lender if they have any better products available and don't be afraid to shop around to get the best deal.

Step 3 - Finding the ideal property
It is crucial to do your homework. You will need to consider what aspects of a property are most important to you:

 - number of bedrooms
 - parking provisions
 - separate kitchen and dining room
 - private garden
 - swimming pool
 - the level of the service charges
 - how much time/money you may want to spend redecorating etc.

An additional key point in the process of finding the ideal property is to only deal with RERA registered agents to minimise the risk inherent with any transaction. Once you have selected one or several RERA registered agents tell them exactly what type of property you are looking for and the elements that you could possibly compromise on.

The area
If you are moving to a new area, you may want to do some research to see if it is suitable for your lifestyle. Zeroagents has short videos for the key areas which can provide you with a brief overview. Additionally, you should perform your independent research to check if there are any negative feedback from the area, either through internet searches or through approaching tenants in the building of interest or the Owners Association.

Zeroagents has one of the largest number of property for sale available in the UAE. If you sign up with Zeroagents you can set up your profile and tell us what you're looking for, we'll send you automatic property alerts when a matching property is added to Zeroagents .

Step 4 - Getting the most out of viewings
Use Zeroagents to find out as much as you can about a property you like using the photographs, floor plans, virtual tours, online brochures and local information that is available with most descriptions. Always call or email the advertising agent to check any missing information.

As soon as you have established the property is of sufficient interest for you, book a viewing with the agent.

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Create a viewing checklist incorporating what is important for you to make sure you don't miss anything essential to you!

Also, don't forget to take a camera and tape measure on every viewing you go on - the camera is so you can avoid having to rack your brain about which property had the lovely en-suite. With cameras built in as standard on most mobile phones, this is easier than ever. The tape measure is for you to see if your large/favourite pieces of furniture will fit in the rooms.

Step 5 - Negotiating and making an offer
Once you have found the property of your dreams, the next step is to make an offer. It is important to consider a variety of factors when choosing your price level in order to achieve the right deal for you. Take a step back to logically look at all the things that matter before making your offer.

Be sure to check if they are in a hurry to sell or have been trying to sell for a long time. If so, they may be willing to accept a lower offer to make the sale. Sellers who are not in a hurry to move are more likely to hold out for a higher price.

Knowing your budget ceiling is crucial so decide your maximum limit from the start and stand firm. If the seller refuses to budge, you need to think very carefully if the property really is worth the extra money and of course, what you will have to live without over the long term. Do your homework and check what the property is truly worth. Whilst sold house prices can help give an idea of recent sales, it's better to see what the competition is like now using our Valuation Information. If there are few similar properties for sale in the area, chances are the seller has the upper-hand. Also, if there are any faults or repair work required, use this to justify a lower offer. In tougher times when there are fewer buyers, sellers may be more willing to negotiate on price but since the last crisis the market prices have generally trended upwards and sellers are often holding out for their asking price.

Once you make an offer make it clear that it's subject to contract. The standard procedure for purchasing a property in Dubai is that once terms are agreed, buyer and seller sign a Memorandum of Understanding (MOU) and the buyer will pay a deposit (approximately 10% of the purchase price) which will be deducted from the amount to be paid upon the transfer of ownership at the Lands Department. Your RERA registered broker will prepare the MOU and arrange for an appointment at the Lands Department for the change of ownership.

And lastly, good luck!