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
