Dubai may limit sales of off-plan property

[DUBAI] Dubai is considering regulations to limit the sale of properties before they are built to address one of the main causes of the 2008 property crash, according to the International Monetary Fund. "The Dubai authorities are completing a review of the off-plan transaction market, and will issue additional regulations, which could slow down real estate sector price growth, in the coming months," the IMF said in its Article IV consultation dated July 3.

Dubai's recovery from the verge of default in 2009 fuelled a 35 per cent increase in real estate prices last year, according to broker Knight Frank, sparking concerns the emirate is at risk of a bubble in the real estate market. That prompted authorities to double property transaction fees to 4 per cent last year and the United Arab Emirates' central bank to impose mortgage caps.

The buying and selling of off-plan properties for a quick profit, known as flipping, was seen as a major cause of the crash in 2008. Buyers usually put down a deposit of about 10 per cent on off-plan homes and make additional payments as construction progresses, with a final sum due when the property is delivered. At the height of the property bubble, contracts often changed hands before any construction took place.