DUBAI, UAE - In a bid to arrest a burgeoning property crash, and to revive a flagging economy, the Dubai government has introduced a number of initiatives including substantial reductions in government fees, the introduction of residency visas for real estate investors, and the issuing of liquor licenses to tourists.
The Federal government too is slashing work permit fees and costs for 145 government services, from 50% to 94%.
Property prices across the UAE, particularly in the largest emirates of Dubai and Abu Dhabi, have collapsed over the past five years, and according to reports are now dipping below the levels reached during the GFC in 2008/9. Property prices and rents have been falling non-stop since 2014, accelerating in the past year.
The proliferation of new development has seen the country become way over-supplied with real estate, and with the economy flat, there is little to stimulate demand, sufficient to see any improvement.
Hotels have also become over-built, with far too many properties, and numerous more still under construction. One 5-star hotel in one of the most attractive areas of the city last month recorded single-digit occupancy levels. Room rates have dropped so sharply, that retail investors that have bought hotel rooms and apartments, are receiving next-to-no return from their investment.
The government has recognised funds need to be spent on infrastructure, and more effort needs to be focused on developing the business environment, rather than simply building real estate.
Adding to concerns about the UAE economic outlook is the impact VAT is having on the economy. The 5% impost introduced on January 1 last year, has been a drain on the economy.
There is speculation the transfer fees on property sales, which were increased from 2% to 4% in 2014, may be reviewed. The increase that occurred is widely believed to have been the catalyst for the puncturing of the real estate market.
The moves by the Federal and Dubai governments are quite aggressive and indicate there is a genuine attempt to turn things around.
The Dubai Land Department meantime has granted 'golden residence' to 20 real estate investors from more than a dozen countries that have made substantial property investments in the emirate. The move has been initiated by the General Directorate of Residency and Foreigners Affairs.
During a ceremony this week (pictured), the five-year Golden Residence cards were handed over to real estate investors whose investments in the local real estate market are not less than 5 million dirhams ($1.365 million). All members of their families, including spouse and children, benefit from this privilege, said the WAM news agency on Friday.
Conditions for obtaining a residency visa for five years include investment in one or more existing properties as the total value of the real estate asset, regardless of whether the property is owned by an individual or a group of investors.
(Photo credit: Dubai Land Department).