Dubai's municipality has announced payment of housing fee at five percent of the annual rent for a particular residential property according to its locality. Freehold home owners would also have to pay 5 percent of the rent of their respective properties changed from 0.5 percent of the purchase value for that property set previously. How will this impact the prices of the units and have an affect on the rental values? Who will be affected the most, Tenants or the Owners?
I don't think this is a good step for the Dubai property market as this will directly impact the way investors would look at the market. Furthermore this will reduce the appeal of the market and make it less attractive to investors.
Anyhow, only time will tell how the public reacts to this new fee or in my opinion it should be termed as property tax. The Government surely needs to make more money and this is one of the many steps they are taking to increase their collections and revenues.
Maintenance charges are already quite high and this new levy is not going to help either the investor or the tenant. But we do need to keep in mind that every country in the world has numerous taxes including income, property, council tax etc. This small fee is not as significant as these taxes and all in all the property market is still quite attractive for long term investments.
Travel, Tourism, Real Estate and Financial Services are the main source of income for Dubai and as we know Dubai is still facing some problems regarding finances, therefore they are trying to generate income through the real estate sector.
We know that the tenants pay the housing fee so they are the one to get affected by this fee the most. But I think it will affect the Home Owners too as the attraction in Dubai real estate will decline for the investors. It may cause the Owners to reduce the property prices in future.
I think that it is not such a significant amount that will turn the upside down of the real estate market. We all know that Dubai is trying to shake off the after effects of recession so the government is levying such kind of taxes in form of annual fees.
The amount is not so big that it will effect the tenants or owners but i think it will affect the foreign investment in the way that investors might consider it just a starting of series of property taxes and more taxes will be imposed in future. Thus they may feel reluctant to invest in properties but at the same time Dubai is an emerging star still and it is the best suitable place for long term investment.
(4 Answers)
