Guide to buying in Abu Dhabi
What should you know about buying property in the UAE’s capital? It’s easier than you think, says Kika Pavese, General Manager at MD Real Estate.
Buying a home is always a big decision, no matter the location. And if you believe the process of purchasing a home in Abu Dhabi will be a daunting one, you’re not alone.
Easier than you think
Many questions arise when you first think about buying a home. Some of the most common queries raised by buyers include: What should I know about buying in Abu Dhabi, when is the right time to buy and should I buy at all taking into consideration the expected length of my stay?
What should you know about buying in the emirate? Firstly, buying in Abu Dhabi is much less hassle than most people think. Given the transparency of the market and availability of information online in the UAE, overall, the country provides a safe environment for buyers. This includes legal protections that enhance buyer peace of mind.
Your property search
Search platforms allow buyers to compare offerings to ensure they are paying within fair market range. Searching for your future home on online portals can also assist in identifying community-focused agents who can assist with guiding you through the process.
It is important to choose an agent that works for a reputable agency. This ensures you not only receive a professional service, but also knowledgeable advice. When working with your agent, questions around location, proximity to work, schools and other infrastructure should be considered before targeting specific areas in your search. From there, the question of what to buy, as well as size and pricing, will be critical.
Viewing a number of properties will provide a greater sense of what is available in the market and what suits your needs.
Applying for a mortgage
If applying for a mortgage, you will need to be a resident in the country with a current valid visa with a minimum of six months. Most banks currently offer a loan-to-value of up to 75 percent of the purchase price.
As a minimum, you will need to have a 25 percent down payment for your deposit. Agency fees of 2 percent are payable to the real estate agency when transferring the property to your name. In addition, Abu Dhabi Municipality will charge a 2 percent levy on the purchase price.
These amounts can be split between buyer and seller if all parties agree through the execution of a Memorandum of Understanding (MoU) signed by both the buyer and seller. The MoU is the governing contract between both parties and will be required as part of your mortgage application to the bank.
A copy of your passport along with a valid visa, Emirates ID and employment letter with salary certificate also form part of your initial bank application.
Depending on the development, you may also be charged for a No Objection Certificate (NOC) to ensure the property is free and clear of any incumbrances.
As an owner, you are required to pay property service charges every year; this is calculated differently in each development and should be thoroughly checked when considering purchasing any property. Apartments and villas may also have different rates.
In terms of process, when choosing the property to buy, the first step is the negotiation of the MoU itself. This is signed between the buyer and seller and must be witnessed, normally by the agent. After starting the home loan process with the bank, they will send a valuation company to the property to complete a full report and ensure it is being bought for a fair price within the market range.
In case the seller of the property has a mortgage in place, the buyer’s bank will clear the seller’s mortgage, leaving the property free to be sold without any liability.
If there is no mortgage on the property, the buyer’s bank will organise a manager’s cheque for the day of the transfer and hand it over to the seller directly. Once the process is completed between the banks, the agent will book the transfer of the property.
Buyer, seller, agent and bank representatives (if applicable) then meet at Abu Dhabi Municipality or the developer’s office to complete the process and transfer the property to the new owner.
Under the new Abu Dhabi law, in all completed developments, owners receive a title deed, which serves as legal recognition of their ownership of the property. This makes it simpler to obtain a mortgage in the future as well as to get insured against any legal difficulties they may fall into.
When to buy
When it comes to knowing the right time to buy, those who are following the market should note that prices between similar properties have now largely aligned. The opportunity for arbitrage has greatly decreased this year as we have seen prices adjust to natural market forces of supply and demand.
Ongoing leasing transactions are happening every day in a more stable market, adding more assurance and confidence to investors in Abu Dhabi.
The opportunities we are currently seeing in the market favour buyers. In my opinion, it is a buyer’s market and significant opportunity exists to negotiate a great deal.
To answer the question of: ‘should I buy considering the expected length of my stay’ – the answer to this may lay in remuneration. If, like many expats residing in Abu Dhabi, the compensation package includes a housing allowance, it may make greater financial sense to purchase a property and convert that allowance into an investment rather than rent payments never to be seen again.
Given the liquidity of the market, you have the option to sell your property once you leave the country. On the other hand, you can also rent it out. Potential rental income is higher than other comparable markets. In most cases, rental income will cover your mortgage repayments factoring yields of approximately 6 to 7 percent in current market conditions.
Notably, 2018 saw a government focus on immigration reform with the introduction of longer visa options for those who wish to reside here in the UAE.
Where is the market headed in 2019?
As for which direction the market is headed in 2019, it can be said that 2018 was an important year for the country in terms of stabilisation.
In a rapidly developing country that has experienced economic ups and downs following the global financial crisis, particularly in the real estate market, I strongly believe that we are now turning a corner.
In my view, there will be limited volatility in house prices in the coming year. I base this view on the recent stability we have seen in the market combined with the announcement of government stimulus initiatives to assist the economy. This can only lead to increased investor confidence and is positive news for existing homeowners.
The country that just turned 47 years old has been through many different phases, but we are now seeing the spectacular UAE capital reach a period of stable growth.