Glossary / Property

Transaction cost drag

Transaction cost drag is the round trip cost of buying and selling an asset expressed as an annual percentage, calculated by dividing the total cost by the number of years held.

A Dubai round trip costs roughly eight to ten percent of value once the transfer fee, both agency commissions with VAT, and the trustee and NOC charges are counted.

Held two years, that is four to five percent a year, which consumes an entire net yield. Held seven years, it is under one and a half percent. The cost did not change. The denominator did.

Where people get it wrong

Thinking of it as a one-off. It is a rate, and the rate is set by how long you hold, which is the one part of it you control.

The framework behind it Transaction cost drag and the minimum hold sets out the rule, the arithmetic and where it breaks.

Read the framework

Related terms

Minimum hold period The minimum hold period is the number of years a property must be held for its income and growth to cover the round trip transaction costs, below which the purchase cannot pay for itself. Transfer fee The transfer fee is the charge levied by the Dubai Land Department to register a change of property ownership, set at four percent of the sale price and customarily paid by the buyer. Net rental yield Net rental yield is annual rent minus every running cost, divided by the purchase price plus every acquisition cost, which makes it the only yield figure that describes money actually reaching the owner.

Investments Playbook publishes educational research and general information. Nothing on this site is personal investment advice, a solicitation, or a recommendation to buy or sell any asset. Property and securities can fall in value. Past performance does not predict future returns. Figures shown are indicative and may be delayed. Always take regulated professional advice before acting.