Why Dubai is Still Worth Your Real Estate Investment
Is a Dubai real estate investment a worthy one? It’s a question that many people may be pondering. In our view, the answer is a resounding yes. What makes Dubai real estate investment opportunities more advantageous than those in other top global cities? We’ll explain some critical features in the market and the recent reforms seeing the UAE make conditions more fruitful for foreigners seeking to make a longer-term commitment to the country.
But first, the Dubai real estate investment market at a glance
At the beginning of 2020, we highlighted the state of Dubai’s real estate market and the hopes for a potential Expo 2020-related surge. The last peak for the market happened in 2014, coinciding with a collapse in oil prices. The authorities also established a real estate commission in late 2019 to address oversupply problems that added to the challenges of making the market recover. All of this was the panorama before the pandemic.
How did changed plans shift market conditions? While the Expo got pushed off until late 2021, the emirate’s efforts to open the economy back up through demand-reviving measures saw figures hit seven-year highs in the final two months of 2020. Property Finder, one of the top real estate portals, in conjunction with Dubai Land Development, found that transactions, both in monetary volumes and in number, more than doubled at the end of 2020 compared to the second quarter of the year.
Is Dubai real estate a good investment?
Before we dive into the details surrounding the intricacies of capital investment in real estate in Dubai, let’s recall a tenet of Investing 101: you should buy when the prices are low and sell when they’re high. That principle tells us that the timing is suitable for a real estate investment in Dubai when it comes to pricing. In 2020, prices for residential properties almost reached the replacement point (the threshold where it’s cheaper than the cost to build it). Whilst it appears prices reached this level, it may not last long as vaccines, and the expected economic recovery could lead to prices increasing.
Along with favourable conditions in pricing, Dubai boasts excellent affordability when you compare some of the top global real estate markets. The 2020 UBS Global Bubble Real Estate Index saw Dubai’s prices “fairly valued” compared to London and Paris. Housing in Dubai improved its affordability, even with income levels decreasing and unemployment rising. Dubai’s also introduced measures to increase demand for first-time buyers through lowering the required loan-to-value ratios. Your investment will also benefit from desirable gross rental returns, an average of seven per cent in Dubai.
Plus, Dubai’s long-term benefits remain robust with its appealing tax base, world-class infrastructure, excellent healthcare and education options. Inevitably, the pandemic is inciting some people looking to upgrade to larger dwellings since they are spending more time at home. Coupled with more affordable prices and proactive government intervention to stimulate economic activity, the market for ready-made homes has seen increased demand.
Besides the factors leading to a rise in secondary/ready properties, the emirate now has started to make strides in addressing why foreigners were reluctant to put down more established roots that made people pause in buying. Why does this matter for real estate? Foreign residents traditionally have felt reluctance in buying in Dubai due to the nature of their visas. Since most expatriates have short-term employment-based visas, they never knew how long they would stay and found themselves reluctant to commit.
With this in mind, the UAE introduced new long-term residency permits for those looking for a longer-term stay. Real estate investors can qualify for a five-year permit if they invest in a property worth at least 5 million AED and meet the relevant conditions. There are also select people eligible for a ten-year Gold Card visa through their achievements. Plus, those looking to spend their golden years in Dubai can take advantage of the newly-introduced retirement visa scheme.
With the projection that more people will settle in Dubai from abroad, the country also reformed significant swathes of its legal code to make living conditions more hospitable. They include lifting a ban on unmarried couples living together in the same home, modified divorce legislation and decriminalising drinking alcohol. Finally, they seek to open up more entrepreneurship opportunities for foreigners by lifting the 51/49 majority stake rule for onshore or Mainland companies.
Where are the Dubai real estate investment opportunities?
Even though DAMAC Properties Chairman Hussain Sajwani predicts that it will take the Dubai real estate market up to 24 months to thoroughly recover from the pandemic’s impact, the numbers already look promising. Property Finder reported that Dubai real estate transactions saw a 37% increase in value (worth 3.74 billion AED) and a 15.5% increase in volume (totalling 3,300 transactions) from the same period in 2020. With this in mind, here are some of the areas that could be ripe for investing funds.
Dubai Marina
Dubai Marina has long been one of the most desirable areas for foreign investors looking to buy a property. With a wide range of prices for luxury condos, high-rise towers and villas. A studio can be had for 430,000 AED (£83,127.67) with the most expensive penthouses at 56 million AED. The neighbourhood is one of the only in Dubai with large apartment sizes. Many of the residential towers have amenities right on the premises and ground-floor commercial space.
Another reason why the area is so attractive is that there is so much right in the vicinity that residents can reach within walking distance. The beach is close by, and the marina area boasts a whole host of restaurants and shops, along with miles of walking and running paths for people to enjoy the outdoors and pleasant climate. It’s no wonder why many people have their homes or buy-to-let for short-term/tourist rentals in this area. The average return on investment in Dubai Marina is around six per cent, making it a very respectable performance for choosing this frequented area.
Resort-style luxury
Many of the properties that foreign investors desire offer a resort-luxury experience without the hassle of maintenance you can find from a single-family home. Waterfront communities like Dubai Marina and Palm Jumeirah are the hubs for these “mansions in the sky.” There will be a mix of indoor/outdoor amenities and more living space (something that many came to value in light of the pandemic). If you’re buying a property that you won’t visit that frequently, a smaller unit with included property management could prove to be a more intelligent investment.
Smaller units in downtown areas
Second homes in Dubai saw two faces: the holiday homes in managed communities that could prove to be a source of rental income to offset the costs and the “co-primary residence.” What’s a “co-primary residence,” you ask? It’s a smaller flat in the city near the office. Many executives decided to relocate to large homes in gated communities on the outskirts of Dubai as stay-at-home orders went into place. As they continue to work from home, their change in mindset about the office will cause changes in living patterns.
These people will want somewhere to rest their head a few days a week downtown when going into the office while spending the rest of the week in their spacious suburban homes. That way, they can reap the benefits of bustling city life without sacrificing the flexibility stemming from new ways of working. These perceived living trends can also bring a boost to urban areas near business districts.
Are you ready to find the best real estate investment in Dubai?
If you’re ready to take the leap and buy your next investment property in Dubai, look no further than our Dubai real estate and residency by investment experts at Europe Emirates Group. We can support all your goals in Dubai, whether they include relocation, starting your business or having a holiday home to let in this dynamic, global metropolis. No matter your real estate investment goals, you’ll make sure you find the best outcome to suit your professional or personal needs. How can you get started? Schedule your initial consultation today.
Written by
Adrian Oton
CEO, Europe Emirates Group