Dubai’s housing market is the fastest-growing market in the world. It attracts investors from Europe and Asia in search of investment properties or properties to live in while they explore the local market.
- Property Investment in Dubai: Profitable or Unprofitable
- Areas for Real Estate Investment for Foreigners
- What Types of Property is Best to Invest in Dubai
- 10 Highest-yielding Areas of Dubai for Property Investment
- Dubai Marina
- International City
- Jumeirah Village Circle
- Damac Hills
- Palm Jumeirah
- Arabian Ranches
- Al Barsha
- Business Bay
Property Investment in Dubai: Profitable or Unprofitable
Dubai’s property market was one of the fastest-developing in the world in 2022. The total value of almost 100,000 real estate transactions reached $73 billion. According to various estimates, the demand level increased by 50-80% in 2022 compared to 2021. However, it is worth mentioning that the pandemic greatly affected and changed global markets in 2021. The current state of the housing market in Dubai is the outcome of a low-base effect: there is rapid growth in the emirate following sharp declines in 2020 and 2021.
Experts forecast new sales records in 2023 but also a slowdown in price growth. Prices will return to pre-pandemic levels and will no longer grow as rapidly as in 2022. This means that profitability for investors may decrease. According to Savills analysts, prices in Dubai’s elite sector increased by about 12% in 2022. Price growth by the end of 2023 is expected to be around 6-8%.
New buildings in the UAE
If you want to invest in Dubai, but are not looking for immediate maximum profit, you can consider renting out an investment property. The influx of digital nomads and businessmen from other countries has driven up demand for this sector in Dubai. They rent houses in the most expensive and prestigious districts of the city. This is driving up rental rates in the best areas. The population of Dubai is expected to double by 2040, further boosting rental demand. The annual rental yields of the most popular properties in Dubai amounts to 12-13%, and one can expect to get 5-8% on average.
Even considering the possible slowdown in Dubai’s real estate market, it is still worth considering as a property investment opportunity. Few places in the world boast such growth in demand and prices. The forecasted price rise by 6-8% will outstrip rates in Singapore, Miami and Milan, also in the top five global cities for luxury residential price growth. It is expected that across 30 global cities with high luxury property demand, as tracked by Savills, the prices will rise only by 0.5% per year.
The United Arab Emirates and Dubai, in particular, are known for their investor-friendly practices for foreigners. The number of buyers from the UK, France, Switzerland, and other European countries is on the rise. Investors choose Dubai real estate to protect their savings from high taxes and inflation. Demand from investors from Russia, China, and India is also growing.
Areas for Real Estate Investment for Foreigners
A law establishing the right of ownership for foreigners in Dubai was adopted only in 2002, but this law had a number of restrictions. Freehold ownership means full right of ownership and is permitted only in specifically designated freehold zones. The emirate authorities approve the list of these zones. In some of them foreigners can buy only flats, in others, only villas, while in some of them, foreigners can buy any type of property.
Photo: Bruce Kamm (Unsplash)
As of 2023, about 70 zones are available to foreigners. The list of freehold areas is regularly updated and includes all the most popular and best areas: Dubai Marina, Palm Jumeirah, Downtown, Business Bay, Damac Hills.
In other areas, you can purchase real estate only for leasehold: the buyer gets the right to use an apartment or a villa for up to 99 years.
What Types of Property is Best to Invest in Dubai
Demand is growing in the areas of Palm Jumeirah, Jumeirah Bay, and Al-Barari. At the beginning of 2023, it increased by 30% compared to the end of 2022.
Photo: Vladan Raznatovic (Unsplash)
Investors gravitate to projects under construction, which offers them to get a lower price compared to the price of completed properties. They make a profit on the price difference upon completion of construction, and then it is up to them to decide — either to sell the apartment and collect a profit, or to receive rental income.
10 Highest-yielding Areas of Dubai for Property Investment
When choosing an area to buy real estate, investors can rely on annual growth of prices and rental rates or on the average level of profitability. We will tell you about ten districts with the highest potential rental returns.
Dubai Marina is one of the most popular districts with beaches, skyscrapers, and all the necessary infrastructure. Additionally, Dubai Marina is adjacent to another remarkable area of Dubai — Palm Jumeirah.
The return on investment in the apartments in Dubai Marina stands at 7-8% per year or even more for short-term rentals. The average price of one square metre in Dubai Marina has gone up by 12%, while the asking rates have increased by 40%.
This area has more affordable residential property compared to Dubai Marina with rental returns around 9%. The area is located in the suburbs of Dubai and attracts buyers who want to take advantage of lower prices than those in the city centre.
Properties in this area are not eligible for short-term rentals because of the remote location, but they are a good option for long-term rentals. People who do not need to be constantly in the centre of city life, but require well-developed infrastructure often choose to live in International City.
Jumeirah Village Circle
Apartments in this area brought up to 7% profit in 2022. This is a popular budget-friendly location among both investors and those looking for accommodation options. The price of one square metre went up by 7% during 2022 because of the growth in demand.
Profitability in this area is also approaching 7%, while the annual increase in prices for villas was about 24%. Rents for three- and five-bedroom villas went up by an average of 9% during 2022, though rents for two-bedroom villas decreased by 5%. In addition to villas, townhouses and apartments can be purchased in the area.
The area attracts family tenants and property buyers, and particularly lovers of an active and healthy lifestyle. Damac Hills features an 18-hole international golf course, sports and wellness centres and spas.
This is an upscale location. Real estate prices here have increased by 25% over the year. Rental yields of apartments stand at 3.5% per year, while it’s about 5% for villas.
This is one of the most prestigious parts of Dubai. People who prize status over affordability choose this area.
This area is popular with property investors who want to buy luxury villas and gain rental income. Residential property prices in Arabian Ranches increased by more than 8% over the year. The average yield of villas is about 4-5%.
This region is suitable for those who are tired of skyscrapers and want to move into a lush green oasis. There is a golf course, a riding club and tennis courts. Tenants with children appreciate the area for its high-quality schools and the availability of high-level private clinics. The city centre is within a 20-30 minute drive.
The area remains one of the most popular among those who rent luxury villas in Dubai. Average rents increased from 16 to 27% per annum, depending on the number of bedrooms. Real estate investment in Al-Barsha brings its owners up to 6% per annum.
This is one of the best areas for tenants with high incomes and big families. The average cost of renting villas has grown rapidly over the year — up to 54%. Rents for four-bedroom villas have risen the most. The average rental yield for villas is currently 15% per year.
The profitability of apartments for rent is about 6% for long-term rentals and 11-13% for short-term rentals. The cost of housing has increased by about 7% over the year. The area is one of the most popular among those who want to rent luxury apartments in Dubai.
The location also attracts tourists who are looking for short-term rental options in the best area. This is not surprising because icons like the Burj Khalifa skyscraper, the Dubai Opera, the Dubai Mall, and the dancing Dubai Fountain are all located in the Downtown area.