The Dubai property transfer fee will double from Sunday next week.
Arabian Business revealed exclusively on Thursday that the tax will increase from 2 percent to 4 percent of the sale price for all properties, except the first direct sale from a developer to buyer, which will remain at 2 percent.
Industry insiders believed the change could have taken affect as early as this weekend but it has now been confirmed for Sunday.
The short timeframe for buyers and property agents to prepare means some deals are expected to fall over, particularly those involving mortgages, as buyers and sellers haggle over who will pick up the increased bill, which must be paid in cash.
By law, the property transfer fee is paid equally by both buyer and seller, but industry spokespeople said in practice, the buyer usually ended up paying the full amount.
The increase to 4 percent means the charge on a AED2m home would double from AED40,000 to AED80,000.
The amount must be paid in full, in cash and cannot be incorporated into a mortgage.
The increase is intended to stop the rapid on-sale of new and off-plan properties, which has been blamed for much of the escalation in Dubai property prices.
“[The] idea is to curb flipping. It’s a good move. Keeps end users and longer term investors in the game,” a well regarded Dubai developer told Arabian Business, adding: “Gets rid of brokers who put down checks [sic] against properties hoping to find buyers quickly.”
The larger transfer fee should make it less attractive for buyers to purchase from speculators, but it also has the potential to affect end users.
A property sold by an end user – such as someone who has lived in the home for several years and wants to upgrade or leave Dubai – to another end user still would attract the higher transfer tax.
At least one real estate agent said it would likely encourage end users to remain in their property for longer.