Dubai real estate is one of the leading investment destinations not only in the UAE, but also around the world. The reason for this is a favorable economic climate, low taxes and a comfortable business environment. The number of real estate transactions in Dubai continues to grow. By the end of 2023, a record 133,300 transactions totaling $ 112 billion were recorded in the emirate. This is 37% more in quantitative terms and 55% more in value terms than a year earlier.
Compared to the European housing market, where purchasing power has declined since mid-2022 due to high interest rates and inflation, the UAE remains a safe haven for foreign businessmen. One of Dubai’s main competitors is Hong Kong, but it does not offer many advantages. In this article, we will look at how Dubai and Hong Kong differ in the real estate sector; compare the economy, prices, additional housing costs and the tax system.
Market and economy
Both cities are known for their thriving and stable economies. Both the Hong Kong dollar and the dirham are pegged to the US dollar, which ensures the stability of the local currency. Both megacities are characterized by low taxes, convenience of doing business and a free competitive market.
However, Hong Kong’s economy lacks diversification and is more dependent on trade and financial services. The Emirate, on the other hand, pays special attention to technology, innovation and the attraction of skilled labor, seeking to reduce its dependence on oil.
In 2023, the Government of Dubai presented a 10-year economic development plan D33, aimed at stimulating key sectors: logistics, finance, manufacturing and tourism. Hong Kong, in accordance with China’s 5-year plan, is planned to become an international information technology center.
Hong Kong – Dubai: real estate price comparison
The cost of housing in Hong Kong is significantly higher than in the UAE. For example, you can buy an apartment in Dubai with an area of 105 m2 for an average of $ 980,000. For the same amount, only 21 m2 can be purchased in Hong Kong.
The high cost of housing in the Chinese metropolis is due to a number of reasons:
- the policy of maintaining high land prices;
- High population: 7.49 million people versus 3.62 in the emirate;
- the general shortage of land;
- the pricing policy of construction companies.
If we compare Dubai and Hong Kong, differences in this area incline investors to make a choice in favor of the emirate.
Legislative differences in real estate
When choosing whether to invest in Hong Kong or Dubai, you should take into account the specifics of local legislation. Foreigners can purchase housing in both cities.
However, there is a significant difference. Apartments and houses in the emirate can be bought both in private ownership (if it is located on the territory of freehold zones, the number of which is constantly growing) and in long-term lease (leasehold). In Hong Kong, real estate is available only in leasehold.
Dubai has a significant advantage here, as the owners can use the accommodation at their discretion. For example, the government’s consent is not required to sell a freehold property, whereas in a Chinese metropolis this is a necessary requirement.
The UAE is open to citizens of all nationalities, while Hong Kong prohibits the purchase of apartments and houses for Afghans, Albanians, Cubans, North Koreans and residents of mainland China.
Features of the transaction
To buy a property in Hong Kong and obtain a title deed, you need to wait about 2 months from the date of signing the contract. In the emirate, the whole process usually takes about 4 weeks. The purchase procedure in both cities is similar, but the additional financial costs are significantly different.
In Hong Kong, foreigners must pay an ad valorem stamp duty (AVD) of 4.25–7.5% and a purchase fee (BSD) of 7.5%. When selling a home within 36 months from the date of purchase, the real owner also pays a special stamp duty (SSD), which can range from 10 to 20%. This is an important circumstance for investors: it is quite possible to buy an apartment or a house in Hong Kong, but the resale strategy should not be considered here.
There is a one-time fee in the Emirate, which is paid to the Dubai Land Department (DLD) and is 4% of the purchase price. This is the largest payout. In general, the additional costs here reach about 4.5% when buying on the primary market. On the secondary, it is worth adding a 2% commission to the broker. There are no penalties for resale – on the contrary, this is one of the most common ways of investing in Dubai. You can purchase a residence at the construction stage, sell it upon transfer of the project and make a profit of up to 30% of the initial amount.
Taxes on rental income
On the territory of one of the richest emirates of the UAE, income tax is not levied on landlords, which makes it very attractive for investment purposes. The standard income tax rate in Hong Kong is 15% of the assessed value, from which 20% is deducted for repairs and rental costs.
For example, you rent a 1-bedroom apartment for $24,000 per year. $ 4,800 of expenses are deducted from this amount, that is, you pay a 15% tax on the amount of $ 19,200. In total, your annual profit will be $16,320.
Return on investment and rental rates
Dubai has one of the best ROI rates in the world, yielding an average of 5 to 8% per annum for long–term rentals and 11 to 13% for short-term rentals. Thus, you can count on a decent income and a quick payback. The average monthly rent for a 1-bedroom apartment in the emirate is $1,000-$2,000 per month, depending on the area.
In Hong Kong, apartments bring an average of 2-4% per annum, therefore, rental profits are not as high as in the emirate. The average rental rate in the Chinese metropolis ranges from $ 1,900 per month for an apartment in a location far from the center to $ 2,500 and above for a more attractive option.
Obtaining a residence permit for the purchase of housing
Dubai offers a 2-year visa to anyone who invests more than $204,000 in real estate. With investments starting from $ 544,500, you can get a 5-year golden visa. Both documents allow you to sponsor a spouse and children, and a golden visa allows you to sponsor household staff. There are practically no restrictions: you can buy both residential and commercial properties, one or more, under construction and ready, at your own expense and with a mortgage. The main condition is that the minimum required amount must be paid from personal finances.
Since 2023, the program for obtaining a residence permit in Hong Kong for the purchase of housing has been suspended, so at the moment it is not possible to obtain a visa for an investor in residential real estate. However, wealthy people who invest more than $3.85 million in non-residential properties will be able to apply for permanent residence if the following conditions are met:
- The applicant retains the investment for at least 7 years;
- The applicant had net assets of at least $3.85 million during the 2 years preceding the filing date.
Conclusion
Dubai is one of the most attractive investment destinations in the world due to its wide range of freehold properties, high profitability and the absence of income tax. One of the biggest advantages of the emirate is the visa program for real estate investments. Hong Kong, on the other hand, has quite high taxes compared to the emirate and a lower payback, which makes it not a very suitable option for investments.
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