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Property booms are good for UAE economy’, says Damac boss

Property booms are good for the UAE’s economy and for its residents, says the boss of one of the region’s biggest developers.

Ziad El Chaar, the managing director of Damac Properties, told The National: “Property booms lift economic activity and are good for personal wealth levels. They generate income for the government and stimulate the multiplier effect for more investment in the property market.”

His comments come after warnings from the UAE’s Central Bank and from the IMF of the dangers of “overheating” in the UAE property market, which resulted in prices rising by nearly 28 per cent last year, according to official figures.

Damac was one of the developers that came through the property bust of 2009-10 and has re-entered a phase of high growth in its luxury end business.

However, Mr El Chaar warned of the dangers of excessive speculation in the property market and called for the authorities to take new measures to combat it.

“Speculation without fundamental demand would encourage developers to launch lots of new projects that would not be sustainable. The essence of speculation is to sell off-plan for very low deposits, say 5 per cent up front and another 5 per cent in six months.

“We, like some other developers, want a 20 per cent deposit plus 4 per cent for the transaction fee, another 20 per cent over six months and then the balance with the last payment on construction, though this varies on villas and apartments. But no speculator would pay 40 per cent in the first six months, the sums just would not add to profit up for them,” he added.

He called for a government levy on “flipping” – selling properties at a profit soon after buying them off-plan – and asked the authorities to encourage a new class of mortgaged resident property owners in the Emirates.

“The loan-to-value rate for off plan is 50 per cent, compared to a 25 per cent rate for a ready to move property, and that is not good. The banks should reduce the loan-to-value rate but include a ‘flippers’ penalty charge or early repayment fee to prevent speculators utilising a mortgage to gain the finance to move a property on quickly,” said Mr El Chaar.

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