Hidden costs of buying property in Dubai: A comprehensive guide for first-time buyers
As a first-time property buyer in Dubai, it's important to be aware of hidden costs that come along with property transactions. They can sneak up on you, causing more strain on your bank account than you initially thought. However, awareness about these costs can prepare you for what's to come, allowing you to accurately budget, and even negotiate in certain scenarios.
Let's dive into the details of these hidden costs that you need to discreetly factor into your budget plan:
1. Agency fees: Real estate agency fees in Dubai are typically 2% of the purchase price plus 5% VAT. This is generally paid by the buyer and can be a substantial amount depending on the being purchased.
2. Transfer fees: When , a fee is charged by the Dubai Land Department. This is calculated as 4% of the sales price, plus an additional administrative cost of AED 580 for the title deed.
3. Property registration fees: These charges are for registering the property under the new owner's name, either for a villa or apartment. The charges are typically AED 2,000 plus 5% VAT for properties valued below AED 500,000 and AED 4,000 plus 5% VAT for properties valued above AED 500,000.
4. Mortgage registration fees: If you're purchasing a property with a mortgage, there will be additional fees for registering the mortgage with the Dubai Land Department. It's calculated as 0.25% of the registered loan amount, plus a fixed administrative fee, around AED 290.
5. Property valuation fees: Your mortgage lender may require a property valuation to be conducted. The fees for this service are typically between AED 2,500 and AED 3,500 + 5% VAT.
6. Home insurance: Home insurance may not be mandatory, but it is indeed a wise decision to protect your property investment. The exact insurance cost is usually around AED 1000, but may fluctuate, largely influenced by factors such as the property's worth, its location, and the specifics of the coverage.
7. Conveyance fees: Legal transfer and conveyancing services could be your essential allies in ensuring that all contracts and terms are drafted accurately in accordance with UAE law. The typical cost for these services ranges from AED 5,000 to AED 10,000.
Remember, these fees can fluctuate based on multiple contributing factors. These include the overall worth of the property, the intricacy of the transaction, and the extent of the service provided.
8. Security deposit: Providing an upfront security deposit to your real estate broker is a standard part of the property purchase process. Usually, this is in the form of a cheque made out to the property seller, showing your genuine intent to buy. The deposit usually accounts for 10% of the purchase price for ready-to-move-in properties within the secondary market.
9. Maintenance fees: These are costs that come with ensuring your property remains in top-notch condition. They usually cover things like cleaning, security, landscaping, and general repair of communal areas if you purchase a property part of a larger complex or building. It's important to ask about these fees because sometimes, they can escalate if major repairs are needed.
Maintenance fee figures are usually community-specific and denotes a unique charge per square foot. They generally fluctuate between 3 and 30 AED ($0.82–$8.20) for each square foot on an annual basis. The (DLD)'s website is a reliable source to keep you updated on these fees.
10. DEWA fees: When you take up a property, expect to pay utility deposits covering electricity, water, and gas services. Keep in mind, these are not simply one-time charges. In Dubai, utility expenses are a recurring monthly obligation. So, as the property's owner, you will continually shoulder these expenses.
Set-up deposit (refundable upon leaving the property):
AED 2,000 for a Flat (Residential Premises).
AED 4,000 for a villa (Residential Premises).
Activation charges (non-refundable):
AED 100 for connecting electricity and water (small meters).
AED 300 for connecting Electricity and water meters (large meters).
AED 10 registration fee.
AED 10 knowledge fee.
AED 10 innovation fee.
Buying your first property in Dubai is an exciting journey, but it's critical to consider potential costs beyond the purchase price. Understanding these hidden costs will empower you to make informed decisions. Factors such as location, property type, purchase method, and additional community facilities can affect the total cost. With thorough investigation and careful preparation, you'll be able to navigate the buying process confidently and smoothly.