This year's introduction of retirement and long-term visas by the UAE Cabinet could fundamentally change the real estate market in Dubai. Traditionally foreign investment has driven buying and selling activities in the emirate, but we can now expect the emergence of extended property chains typically seen in mature markets, with long-term residents upgrading and downgrading their homes over time.
At the start of 2019, a new five-year renewable retirement visa was made available for non-working residents aged over 55, provided they either own a UAE property worth AED2 million, have financial savings of at least AED 1 million, or have an active income of no less than AED 20,000 a month.
Previously, retirees would have to leave Dubai every 60 days to obtain a new tourist visa. With the offering of retirement visas, together with spouse sponsorship, Dubai can now look to rival popular retirement destinations such as Spain, Portugal and Cyprus.
This will add another dynamic to the city. A huge range of new business opportunities will open up thanks to this initiative to encourage people to settle in Dubai, with the potential for new products and services to be developed for middle-class retirees such as luxury retirement villages, resorts and golf courses. And, of course, the introduction of retirement visas, available for AED 650, is also expected to provide a major boost to the real estate sector. Dubai can compete with major retirement destinations by offering year-round sunshine, the attractions of city and beach living, a well-developed transport infrastructure and central location for international travel. It can also boast to being one of the world's safest places to live.
Long-term residence visas were also introduced this year. These enable foreigners to live in the UAE without the need for a local sponsor. The visas are issued for five or 10 years and are renewed automatically. To be eligible for a 10-year visa, available for AED 1,150, the applicant needs to have AED10 million invested in the UAE or they must specialise in the sciences, culture or art. Company executive directors earning above AED30,000 a month are also eligible.
The five-year, non-sponsored visas are available to entrepreneurs and gifted students and also those who invest in a UAE property worth at least AED5 million. Available for AED 650, this visa is intended to attract talent to the region, encouraging entrepreneurs and high-achieving students to make the UAE their base, where they can enjoy high-quality amenities and a low-tax environment.
This is a smart move that will take the country forward and put it on the global talent map. The hope is that this will help the UAE to achieve more tech success, such as the recent buyouts of Dubai-based brands Souq.com and Careem by US giants Amazon and Uber. The aim is to issue 6,800 long-term visas by the end of the year.
The decision to offer long-term visas sends a strong message that the UAE is a place where you can make a permanent home. It is no longer just a place to work temporarily to benefit from the lack of income tax. There was a lot of uncertainty under the previous visa regulations. The longest available visa term was three years and a local sponsor was mandatory. And if someone lost their job and was unable to find a new one within weeks, they would have to leave the country. If you were a senior executive, with dependent children that was a major worry and acted as a disincentive to move out of the rental sector; now they can put down roots and invest in property, safe in the knowledge they have a future here. The new visa rules will encourage those who meet the criteria to stay for longer, while also making it easier for them to sponsor spouses and children.
As a business owner, I am one of the people that will benefit from the new visa rules. It allows me to take a longer-term view of my life here and provides a great incentive for me to invest in my company. I benefit, and the economy does too. It makes me feel less like a temporary expat and more like a citizen.
Having spent more than a decade living in the UAE, working in the real estate sector and experiencing first hand all the peaks and troughs, I expect the new visa regulations combined with the 100 per cent foreign ownership law, to have a profound impact on the property market in Dubai. They provide an additional level of security for expatriates, enabling them to plan their lives further ahead – we are already seeing an impact in other sectors with extended financing options now being offered for car purchases, for instance.
This is exactly what the UAE needs to be doing: making it easy for people to stay in the country long term because this will have the knock-on effect of turning tenants into buyers. And this will translate into greater stability in the property market, the economy and the community. In particular, I expect to see a boost in demand for properties valued at up to AED5 million as this is considered the family segment not the luxury market.
The new regulations complement a wider push underway in Dubai to increase its appeal to families. We can see this in the investments being made in entertainment and street life here, in developments such as La Mer and City Walk. Even the adverts and billboards are now targeted at families and people making their home in Dubai. There is a very different vibe to 2006 when I arrived in the emirate and properties were changing hands overnight and speculators were lining their pockets without contributing anything meaningful to the economy.
There have been a lot of negative reports about the Dubai real estate market of late. It is correct that prices have dropped by 40 per cent in the last five years, but it is normal practice for prices to fluctuate in cycles. People are still buying and selling property, and that means it is a healthy market. It is either a buyers' market or a sellers' market, and right now the buyers have the upper hand in negotiations.
In fact, the main drag on prices has been the 'cooling measures' introduced in late 2013 to slow the acceleration in the real estate market. The UAE Central Bank issued new regulations on mortgage lending that limited the amount banks could lend to buyers and increased the equity investment required for those purchasing properties. For non-nationals, owner-occupier loans were capped at 75 per cent of the value of the property, if priced at AED 5 million and below, or 65 per cent, if higher than AED 5 million. For a second home or investment property, the loan to value ratio was limited to 60 per cent. For off-plan purchases, no more than 50 per cent of the property value can be borrowed. In addition, non-nationals are only allowed to borrow a maximum of seven times their annual income.
This means expats wanting to buy their first property in the UAE need to have a 25 per cent or 35 per cent cash deposit saved. They also need to be able to cover fees of about 7 per cent – including the 4 per cent transfer fee, the 2 per cent agent's fee, and other administrative costs, and they have to have a certain salary level.
The tougher mortgage regulations and transfer fees were introduced to prevent speculators from overheating the property market, but they also act as a huge barrier to first-time buyers with a genuine interest in purchasing a home in the UAE. And there are many people that would like to move from renting to owning their own home. My company conducted a small survey of tenants in Dubai, asking if they would buy a property if they could get a 95 per cent loan. Some 77 people out of 100 surveyed said they would. This means the appetite exists, but the financial ability is absent.
The impact of the new visa regulations on the residential real estate market has yet to be seen. But by all accounts, industry experts expect to see a boost in demand for property and for prices to bottom out thanks to the incentives that make it easier for wealthy expatriates to remain in the UAE on a long-term basis.
Dubai World Trade Centre - September 2019