All You Need to Know About Investing in Dubai Real Estate
This article was last modified on December 12th, 2022
Dubai is the cultural melting pot of the world. Dubai’s world class infrastructure, urban planning, and connectivity make it a hub not only in the Middle East but all around the world. The dynamic and rapidly growing economy provides exciting investment opportunities year after year. Right now, those exciting opportunities are centered around the real estate sector.
In 2021, Dubai had the highest number of real estate transactions in 12 years and it continues to grow, with more attractions taking place in the luxury real estate market. The competitive property prices in Dubai can be compared to major international hubs like London, Singapore, Paris, Hong Kong and New York.
Currently, Dubai is one of the best cities to invest in property. Some of the reasons Dubai beats out every other city in the world is the lifestyle the residents lead, the year-round sunshine, the low crime rates, the connectivity to the rest of the world, and social diversity. Foreigners need not be intimidated by the prospect of moving to the city as all these factors make the city easy to acclimate and fall in love with.
With the amount of options available in the market, you may be spoiled for choice. It is important to know what you are looking for and things to avoid/mistakes you would make while choosing a property to invest in.
Deciding to invest in Dubai should depend on a comprehensive and detailed analysis and research; You should consider the risks, your capabilities, and the market status to have a well structured plan for such an important step.
Here is a list of factors to keep in mind when making a decision to invest in Dubai :
Location: choosing the location of the property wisely can make or break your investment! The popularity of the location and how accessible it is to attractions and essential destinations are crucial factors.
For example, Dubai is known as a shopping hub on a global scale. Residents enjoy living close to areas with popular malls like Dubai Mall and Mall of the Emirates.
Downtown Dubai, Al Barsha, Dubai Marina, and Palm Jumeirah are all communities home to grand malls in Dubai.
In addition, according to Google Trends, Nad Al Sheba, Oud Metha, Jumeirah Lake Towers, and Dubai Hills are among the highly searched communities; this makes them good options to consider.
- Short-term vs long-term rentals: Some properties will perform better on a short-term lease such as apartments in Downtown Dubai, Palm Jumeirah, Dubai Marina, and JBR; alternatively, villas in Dubai Hills, Jumeirah Park, and JVT provide better yield on standard leases.
- Cash vs finance: You should weigh cash on cash returns and use leverage when appropriate.
- Service charges and property management fees: They differ from one property to another and should be taken into consideration beforehand.
Off-plan vs Ready-to-move
You have two choices when it comes to investing in a property in Dubai, either off-plan unit or a ready-to-move one. The off-plan units are properties that are still under construction and yet to be delivered. On the other hand, the ready-to-move units are already completed and you can use them immediately.
Pros of Buying Off-plan Properties
- Prices of under-construction properties are usually less than those already available
- Reputable developers build communities that gain significant value as they mature
- Down payments are often more affordable
- Attractive interest free payment plans are available which enable investors to build their portfolio according to their cash flow capacity
Cons of Buying Off-plan Properties
- Any changes in the market can be expected and may affect the original value of the property
- Off-plan projects have the potential risk of being cancelled or delayed; that’s why research on the developer is crucial
Pros of Ready-to-move Properties
- The price you’re offered is according to current market conditions
- The availability of seeing it in reality to decide if it’s a suitable option or not is preferable to some buyers
- Ready properties will always have the advantage of generating rental yield immediately post purchase.
What Is Freehold and Leasehold Ownership?
Don’t let the real estate jargon dismay you! These simply refer to the type of ownership you are offered; check the definitions below:
Freehold: Full ownership and legal rights to use, lease, or sell the property are transferred to the buyer
Leasehold: Buyer does not have full ownership of the property which means they own it for a limited time (usually 99 years and can be lessened or extended).
What to Look out for When Buying Property in Dubai?
Forgetting the Extra Costs
Be mindful of closing costs, service charges, and other operating costs to calculate the net yield of the property you’re buying. You need to be aware of possible agent fees, Dubai Land Department fees, mortgage fees, building service charges, or property management fees.
Letting Emotions Get the Best of You
Investment properties are about numbers and not emotions. You may not like the property or neighborhood you’re investing in, but if it delivers a better yield then that’s what you should be focused on.
What Are the Best Areas to Invest in Dubai?
There’s always the question of where to invest in Dubai real estate, an emirate that doesn’t stop growing; this means your investment benefit can differs between now and in the future with such constant changes in the market and demand.
The following statement from the managing director of Mortgage Finder, Mr. Kaswani, may help you with the decision making process:
“Waterfront properties will always be more desirable,” he suggested. “There are pockets of neighbourhoods that are selling at good value. You should leverage Property Finder’s map feature and compare price per square foot against adjacent neighbourhoods.”
“For example, I recently bought a villa in JVT which is a 2-minute drive from Jumeirah Park and a 5-minute drive from the Meadows at a price per sqft that’s nearly 25% below Jumeirah Park and nearly 60% below Meadows,” he continued.
Can Foreigners Invest in Dubai?
Yes, foreign nationals can invest in Dubai real estate in freehold areas and leasehold ones. With freehold properties, once they buy the property, they have the right to use, lease, or sell it as they wish.
As for leasehold properties, buyers don’t have full ownership yet they can only benefit from it for a long period of time (usually 99 years). Foreigners include both expats already living in the UAE and non-residents.
An investment visa is a type of visa provided by the government for non-residents looking to invest in Dubai real estate. There are certain conditions to be met if you wish to gain this visa by investing in a residential property in Dubai:
- To enjoy a stay through this type of visa, you should buy a property of value of at least AED 1 Million
- If the cash option isn’t suitable for you, no worries as you can go for mortgage; however, the property should be maximum 50% under mortgage
- Having a partner investor is a good idea but in such cases the minimum share for each of you must be AED 1 Million
- In order to get this type of visa, the property you will invest in shouldn’t be an off-plan or leasehold one.
Considerations After Investing in Dubai
Once you become an owner of a property in Dubai, you can consider the following tips to help you succeed:
- Hire a capable and credible property management company
- Demand real time reporting
- Treat your tenants well
- Consider quarterly payments to attract more tenants.