Property flipping in UAE and its consequences

Property flipping occurs when an investor purchase some property and immediately sell it to another buyer for profits. Technically the property owner just flips it over to the next buyer and secures profits. Fix and flip procedure is the same except that the investor will go through some basic construction or maintenance work, just to make it sellable or improve its price (adding no value).

Property flipping is also used for mortgage fraud (often with the help of property appraiser and buyer), which is illegal and unethical. Property flipping is a practice commonly observed in real estate investors at rapidly growing real estate markets. Where investors are keen to gain the maximum profits with the growth, this type of speculation based property flipping is bound to happen in thriving markets but things can get out of control if it goes unchecked for a long time. Abnormal hikes in real estate prices and increase in cost of living are associated with property flipping.

Property flipping differs from the usual real estate sales and purchase. Property flippers are essentially looking to resell the property as soon as possible, in case of fix and flip the maintenance work is also of a very basic or temporary level. They are looking to skip through all of renovation and paper work swiftly; main focus is on reselling as quickly as possible rather than adding value. Property flipping is like a fast-forwarded process of normal real estate buying and selling. It has been observed that if the property flipping is not controlled, all stakeholders will suffer including the buyer, lender, residents, government and the real estate market itself.

UAE real estate market is one of the most dynamic markets these days. The kind of growth it has witnessed in recent years has made it an ideal spot for those who rely on property flipping to make quick profits. Property flippers do not like uncertainty, and unlike other major real estate markets, Dubai and UAE real estate markets are not going through the normal uncertainty seen everywhere else. That is why; laws are now introduced to rein in the practice of property flipping in UAE to protect serious investors and developers. A new law in Dubai makes it a compulsion to register with the land department before the owner resells. The delay caused by this registration work will discourage the non-serious property flippers. Also, there are some tax charges that you must pay when flipping property in UAE.