Dubai’s real estate market continues to grow rapidly, becoming a desirable region for investment. Danis Latypov, founder of the Floors Real estate agency in Dubai, talks about prices, demand dynamics and investment prospects in the Emirate.
The relevance and prospects of the Dubai real estate market
— Currently, the Dubai market retains significant growth potential due to an increase in the population and the attractiveness of the emirate for migrants.
According to DXB Interact, an investment attractiveness assessment service, Dubai is the leader in demand for luxury housing. Since the beginning of 2023, he has continuously led the ratings of real estate sales, the price of which exceeds 10 million dollars.
Investors evaluate and invest in facilities under construction, as this allows them to buy real estate at a lower price and make a profit after completion of construction. According to the types of facilities in the city, not only luxury villas and penthouses are in demand, but also studios for expats, whose number is growing every year.
Political stability and a favorable environment for business development help attract wealthy people to the emirate. Successful businessmen, celebrities, highly qualified specialists who want to buy luxury housing move here.
Prospects for price growth
In the coming years, real estate prices in Dubai will continue to increase by an average of 8% annually. In the most promising areas, growth of about 25% per year is expected over the next three years.
The average price per square foot is $423.64, which is 19% higher than in January last year. By real estate segments: the average sale price of a villa is 789.6 thousand dollars (an increase of 12.7% since January 2023). The price for commercial real estate is 326.7 thousand dollars (an increase of 52.3%).
Lower growth is expected in areas where there is already high competition among developers caused by a significant increase in supply. These are the areas of Palm Jumeirah (potential investment growth — 6%), Jumeirah Bay (4-5%), Dubai Hills (3%) and Bluewaters Island (3%).
According to our forecasts, the most attractive areas for investment may show an increase in housing costs of up to 25% per year over the next three years. These areas include Business Bay, Sobha Hartland, Jumeirah Village Circle and Nad Al.
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The most attractive areas of Dubai for real estate investment
When investing in Dubai real estate, the following high-margin areas should be considered.
Downtown is one of the best options for investing in real estate in the emirate, as nearby there are such centers of attraction for local people and tourists as Burj Khalifa and Dubai Mall. Various types of residential and commercial real estate are offered in this prestigious area, which gives investors a wide choice. The average rental yield in the center of Dubai is 4.9%, and the average return on sale is about 5.2%. These figures surpass many major global cities, including London and New York.
Dubai Marina It holds a strong position as one of the best areas in Dubai for investment, which is often referred to as “new Dubai. And this is the best choice for those who strive for a luxury lifestyle. Despite the dynamic real estate market, the cost of apartments for sale in Dubai Marina remains stable. The ROI (return on investment) indicator for apartments in Dubai Marina is 5.8%.
Palm Jumeirah is an iconic and affluent area of Dubai, recognized as an architectural marvel. Due to its exceptional status, it is consistently ranked among the best investment districts in the Dubai real estate market. Statistics show that the average return on investment is 5.3%. In addition to its financial appeal, Palm Jumeirah’s iconic design also positions it as an upscale tourist attraction, which adds extra points to it.
Business Bay — a project recognized as a haven for investors. It has a wide range of options, including offices, luxury apartments and penthouses. It has gained significant recognition in the global market due to its huge potential, with an average ROI of 6%. It is noteworthy that Lonely Planet, the leading publisher of travel guides, consistently ranks Business Bay in fifth place in the list of the most beautiful areas of the world worth visiting.
Dubai Hills is recognized as a clean residential complex, which makes it stand out from other real estate properties in Dubai. Its central location provides easy access to famous areas such as Dubai Marina and Downtown Dubai. Due to the well-developed infrastructure and the offer of services, this complex is a very attractive investment option, offering a solid ROI of about 5.28%.
Popular areas of Dubai for buying investment property
Preferences of foreign investors
The leading investors in Dubai real estate in 2023 included citizens of India, Great Britain, Italy, Russia, France, Canada, the United Arab Emirates, Egypt, Lebanon and China. Increased demand from investors from countries such as China and India is expected to drive the future growth of Dubai’s luxury real estate sector in 2024.
The most popular type of real estate among foreigners is one-bedroom apartments, the cost of which ranges from 300 to 400 thousand dollars. This applies to liquid middle—class real estate located in popular areas – for example, Emaar Beachfront and Marina Beach.
Tips on choosing a property
When choosing a property to invest in Dubai, the following factors should be considered:
- Location. An object located in a developed and sought-after area of the city usually has a high cost. The average rental yield of such real estate will also be higher than in less attractive areas.
- The type of property. The profitability of different types of facilities differs. For example, apartments usually have lower yields than villas.
- The condition of the housing and the staffing of the premises. The quality of the finish, the fullness of furniture, appliances and accessories — all this affects the cost of the object. So an empty room with rough walls is cheaper, but it is also more problematic to rent it out. We will have to take into account the costs of cosmetic repairs and household filling of housing.
- The infrastructure of the housing complex. The presence of security, a swimming pool, and a gym increase the price of the object, while simultaneously increasing its liquidity.
- The state of the market. It is important to monitor the dynamics of demand, prices, sales volume, as well as be aware of tax, migration policy and the business environment in order to determine the optimal time for investment.
- The infrastructure of the area. Real estate that has schools, hospitals, and shopping malls next to it usually generates more income.
- The company is a developer. When choosing a developer, you should check his reputation and reviews on specialized websites. They are usually easy to find through any search engine.
- Payback period. It is necessary to take into account not only the price of the object, but also its payback and expected income.
- The urgency of the sale. It is worth carefully checking all the documentation for the purchased property, especially if it is sold marked “urgent”.
The process of closing a deal for a foreign investor: stages, deadlines, documents
There are two main types of real estate ownership:
- Full ownership (Freehold)— this is the right of ownership, which gives the owner the opportunity to freely dispose of real estate at his discretion: to sell, lease, donate or bequeath. In Dubai, 47 districts belong to Freehold, including the famous Dubai Marina, Business Bay and others.
- Leasehold — real estate rental. In the UAE, the lease term is up to 99 years. However, after this period, the tenant does not acquire the right to the property, and it is returned to the owner. The lease can be extended or the rights to the property can be transferred to relatives.
The process of buying a property in Dubai is as follows:
- The choice of a real estate object and the conclusion of a contract. The terms of the transaction must be in writing in Arabic or English and include information about the address of the object, its cost, additional payments and liability of the parties.
- Execution of a sales agreement (MoU).After agreeing on all the terms of the transaction, a sale agreement is concluded. In Dubai, this is called the “F Contract”. The agreement can be found on the website of the Dubai Land Department.
- Payment of the deposit. The buyer pays the seller a deposit, which usually ranges from 5% to 15% of the total transaction value. If the transaction does not take place due to the seller’s fault, the deposit will be returned to the buyer.
- Obtaining a certificate of no claims (NOC). To allow the transfer of ownership, you must submit an application and pay for a certificate stating that the developer has no claims against the seller. This is practically a confirmation that the seller has no debt. The cost of the certificate can range from $136 to $1,362, depending on the developer. The application review process may take up to 5 business days. After paying off all service debts, the developer can provide a NOC, which allows for the transfer of ownership.
- Transfer of ownership through the Dubai Land Department.After receiving the certificate of no claims (NOC), it is necessary to meet with the seller at the Dubai Land Department (DLD), where the buyer will be given a new Title Deed. On this day, you will also need to pay the cost of the property, provide a receipt and pay an administrative fee.
To register a transaction, you must have the following documents with you:
- the original passport of the buyer and seller;
- title to ownership;
- application for a certificate of absence of objections;
- a copy of the sales agreement;
- legal identity card (ID);
- address reconciliation;
- contact information.
Conditions for issuing mortgages for the purchase of real estate to foreigners
In Dubai, it is possible to buy real estate with a mortgage, but non-residents are often denied access to it. But if you pre-apply for a resident visa, the chances of approval are significantly increased.
Conditions for issuing mortgages to foreigners in Dubai:
- The loan rate for foreigners ranges from 3% to 6.5% per annum.
- The term of mortgage issuance may not be less than 5 or more than 25 years.
- The amount of the mortgage cannot exceed 80% of the value of the purchased property.
- The buyer needs to insure his life for an amount within 0.3–0.8% of the amount of the requested loan. And also pay for the services of obtaining an approved loan (up to 1.5% of the total loan amount).
- The borrower must be of legal age. In the UAE, a person is considered such when he turns 21.
- The age of the borrower should not reach the upper limit. The official limit for issuing a mortgage is 65 years for employees and 70 years for entrepreneurs. But most often the bank refuses to people over 55 years old.
Tax and legal aspects of buying a home in Dubai
The payment of taxes on the purchase of real estate from the developer includes a commission fee (from 2 to 5%), registration fee (4%) and additional fees (from 1,633.62 to 2,722.7 dollars).
If the purchase of real estate is carried out through a mortgage, you must pay a fee for its registration. Payment is made in cash at the registration offices of the Dubai Land Department. The amount ranges from 544.5 to 1089 dollars. There is no real estate tax in Dubai. At the same time, all owners must pay annual maintenance fees.
Opportunities for investors
By investing in Dubai real estate, you can get a resident visa — this is an analogue of a residence permit. For investments in the amount of at least 204 thousand dollars, you will be issued a resident visa for a period of two years.When buying a property for 545 thousand dollars or more, you can become the owner of a golden visa for a period of 10 years for free.
It is easier for residents of the Emirates to open a checking account, since banks primarily trust such clients, considering them to be more reliable.
Investing in Dubai real estate allows you not only to save your own funds, but also to receive a stable profit from 20% to 160%. The purchase process is very simple and does not require an explanation of the origin of the funds. In addition, developers offer interest-free installments. Money can be transferred from any country, and the transaction can be carried out remotely. All this makes Dubai a promising and reliable place to invest in real estate.
Ways to generate rental income
In Dubai, you can make money on real estate in different ways: rent for short or long term, resell after completion of construction. The yield from a long—term lease is 4-10%, from a short–term lease it is 1.5-2 times higher. A commonly used option is to buy at the initial stage, then resell the property after completing a certain stage of work. The initial cost of a one-bedroom apartment for such projects starts from 350-400 thousand dollars. By the time the facility is completed, it can grow to 30%. A medium-term lease combines a short term with a monthly payment, avoiding the limitations of long-term contracts.
The rental yield of residential real estate in Dubai is influenced by the following factors.
- Location. Real estate located in a popular area with good infrastructure and proximity to major places of work and entertainment will have a higher rental yield.
- The size and type of the property. As a rule, apartments with a significant square footage or villas with a large number of rooms and amenities will have a higher rental rate.
- Condition and quality.Residential real estate in good condition and with modern design will attract more tenants and will allow you to receive a higher rental rate.
Potential risks when investing in Dubai real estate
When purchasing real estate in one of the most profitable and reliable regions of the world, it is necessary to take into account possible risks:
- Market volatility. Prices and demand for real estate may change, for example, due to the economic or political situation in the region. An investor needs to be prepared for fluctuations in the value and profitability of his property.
- Taxation. Investors should take into account tax obligations in Dubai and other countries in which they reside.
- Sufficient market competitiveness. Oversupply can lead to a decrease in rental income and resale of property.
- Real estate maintenance. It is necessary to take into account the costs of maintenance and management of real estate, including maintenance and repair costs.
- Liquidity. In some cases, the possibility of a quick sale of real estate may be limited, so investors should be prepared for long-term investments.
Author
Yulia Yanukovych Editor-in-Chief
I am responsible for the work of the editorial office. I write expert interviews and guides.
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