Have you decided on buying a house in the United Arab Emirates because it appears to be a better investment for you, but you are uncertain about the actual costs? Your confusion is not very unusual. Buying a house can be a lengthy and confusing process, especially if it is your first time to buy a house in the UAE. So, how much does it cost to buy a home in the UAE?
When you are planning to buy a home in the United Arab Emirates, you should take into account the fact that the total costs of the house consist not only of the price of the house itself but also various additional costs. These additional costs can be a significant part of the total amount. For example, the average total cost of buying a house with a mortgage is up to 130% of the price of the house itself. Also, purchasing a home on a mortgage loan requires an upfront fee of around 25% to 30% of the total value. The total amount also involves government fees, service fees, and agency fees.
Want to learn more about the cost of buying a home in the United Arab Emirates? Keep reading!
What to consider when planning a home purchase in the UAE?
In order to determine the real cost of buying a home in the UAE accurately, you have to take into account the expenses on all additional costs and the fees associated with acquiring a house. The total of this value can significantly raise the price by around 10%.
If you want to know the total cost of buying a home in the UAE, you have to calculate the total cost beforehand so you can estimate how much you can spend on the house itself. Bear in mind that you will also need to pay all the necessary expenses to maintain the house, repairs, etc. You may also need to get some money ready in case you are asked to make an initial capital commitment. Another thing you should take note of is the compound interest cost.
If you consider a mortgage loan as a tool for your investment, it is vital that you plan everything carefully in order to avoid severe financial strain.
For the correct calculation of the cost of a home purchase and the selection of the optimal solution to avoid severe financial strain, it is highly advisable that you use a professional consulting service. If you do not want to use a professional service, precise knowledge of the real costs associated with buying a home is vital in order to make informed financial decisions.
What extra fees do buyers have to pay to buy a house in the UAE?
Below, we listed the different costs you should expect to incur in the process of buying a home in the UAE.
In the United Arab Emirates, all purchases must be registered with the government. However, the regulations and fees can be different for each emirate. Let’s take a look at the government fees in Dubai for example.
You have to register your purchases to the Dubai Land Department (DLD) within 60 days of the transaction. If you fail to register the transaction within this period, the purchase will be void. The DLD fees are 4% of the purchase price plus AED 580 admin fee for apartments or AED 430 for land or AED 40 for off-plan properties. In theory, DLD fees should be divided equally between the seller and the buyer. However, in practice, you as the buyer usually pay the whole 4% to the DLD.
You also have to pay for the Property Registration Fee. For properties valued below AED 500,000, the property registration fee is AED 2,000 +5% VAT and for properties valued above 500,000, the fee is AED 4,000 +5% VAT.
If you purchase the home via a bank loan, you must pay an extra fee of 0.25% of the total loan amount to the DLD This additional fee is not valid to cash buyers.
If you use the service of a real estate agent, the cost of the house will be raised by the agent by 2% plus VAT. Working with the right, qualified agent allows you to receive the best advice throughout the buying process. Your agent will also make sure that you are well-informed and understand all the related costs.
If you use a conveyance service and support, you also need to pay for the conveyance fee. The amount of conveyance fee ranges between AD 6,000 and AED 10,000. A professional conveyancer helps you make sure that all contracts and legal terms are written accurately according to the UAE law.
If you complete your purchase with a mortgage, you may need to pay for a bank mortgage arrangement fee (1% of the loan amount +5% VAT) and property valuation fee (between AED 2,500 and AD 3,500 +5% VAT). Some banks may allow you to add these costs to your mortgage to ease the weight of the initial financial outlay.
You have to pay a deposit in order to secure the home purchase. The initial deposit for completed property purchases in the secondary market is around 10% of the purchase price.
What bills to expect when owning a house in the UAE?
Once the transaction has completed and you have successfully bought the property, there is an additional expense you need to consider: service fees. These are recurring fees that you have to pay for the maintenance of the building. For villas and apartments in Dubai, the service fees are charged on a square foot basis. This means that the larger the property you own, the higher the service fees you have to pay.
Electricity and water fees
The cost of electricity and water fees varies a lot, depending on where your property is. The fees can range between a few hundred dirhams for apartments and slightly higher for villas, usually depends on the number of meters installed. The average person consumes around 30 thousand kilowatt-hours and almost 130 gallons of water per year in the UAE.
If you want to know the cost of buying a home in the UAE because you are planning to purchase one soon, then the example below may help you out.
The cost of the property is AED 1,000,000. If you want to apply for a mortgage, then you have to make the initial payment of 25% of the total cost, which is AED 250,000. Furthermore, you also have to pay for the additional costs for completing all registration procedures, which is approximately 10% of the total price (AED 100,000). Therefore, you should have the initial amount of AED 350,000 on hand beside the actual cost of the property itself.