Property flipping in Dubai

Property flipping

Once left unbated, resulted in a massive spike in property prices.

The act of purchasing a revenue-generating asset(most commonly real estate), and quickly reselling it for profit is referred to as “flipping”.

Several years ago, before the property market crash, it seemed that property flipping was happening everywhere, with adverts for mortgages and loans in every newspaper,and reality TV home makeovers shows dominating the screen. Property flipping seemed all the rage and nowhere more so than in Dubai. Back in 2002,when expats were first given the right to own the leases to their homes,it was common place for them to buy and then”flip” the  lease for property to another buyer once the value of the property had increased. As a result, property prices increased in some areas by as much as 79% according to Better Homes Dubai.

Whilst flipping has been a common practice throughout the world as a way for investors to increase the profit made from investments and make money simply by buying and selling at the right time,it had a significantly negative effect on the UAE real estate market. Continuing unbated property flipping resulted in a massive spike.

“As a result property prices increased in some areas by as much as 79%”

Better Homes Dubai in property prices in the UAE which had the knocked on effect of increasing the cost of living in Dubai. This, in turn, diverted potential investors to other less expensive cities to invest in and resulted in a tumultuous real estate market that was unprepared for the property crash in 2009.

In the ‘’good old days’’, some investors would buy property off-plan and then sell the property at escalated price once it was completed. However, this is clearly no longer feasible as project completion has slowed down significantly, compared to the speed of work during the real estate boom of 2007 and 2008.

New mortgage laws have been introduced to protect against fraud, particularly fraud-for-profit. Only registered financial institutions are allowed to grant mortgages. Those looking to buy and resell off-plan property must provide registration proof with land department. The sheer amount of paperwork required can inhibit the speed at which potential flippers could buy and resell properties.

Speculation Flipping

Speculation flipping is the act of buying a property low and then selling it at a higher price simply based on market speculation of what the property will be worth, without adding anything to validate or justify the increased price.

It can be viewed as “predatory” in nature since it usually involves taking advantage of investors or buyers with fewer options and less information available to them.

Whilst Dubai is making an effort to curb this practice and regulate the property market, more transparency is required throughout the buying process, so that investors are not left to base their decisions on whatever(mis)information they are given.

Fix & Flip

In the case of ‘’fix & flip’’, the “flipper” puts in knowledge and effort to make the property better and add value to it, therefore making it logical to command a higher market price.

This may involve making both cosmetic and construction improvements such as refurbishing or redecorating the property,landscaping or improving the inner workings of the property such as the water or electrical mains.

Another way of making a profit is by investing in up and coming areas where prices are projected in increase dependent on the introduction  of local amenities such as transport links,schools and shopping malls. Not to be confused with property flipping, this form of investments takes time to mature and is a valid reward for investing in the right place at the right time.

Property Flipping