Investment in Dubai: How to Earn Money from Real Estate

Investment in Dubai: How to Earn Money from Real Estate

Dubai is a big and, more importantly, rapidly developing metropolis. At present it has a population of 3,500,000 people, while several million come to the city on vacation or on a business trip every year. In the first seven months of 2022 the biggest city in the UAE has welcomed more than eight million guests. The significant number of expatriates and tourists guarantees high demand for housing. As a result, anyone planning to invest in real estate should take a close look at Dubai.

Several price records were set on the Dubai real estate market in 2022. According to the local media, in the Palm-Jumeirah archipelago, the most expensive district, three villas were bought for the total price of USD 320 million. Fortunately, not every property is that expensive. You can find in Dubai more modest options that are much easier to let and, in time, resell.

Foreign citizens should know that they can choose from three types of ownership rights:

  • freehold — unlimited ownership rights;
  • leasehold — a long-term lease agreement (up to 99 years);
  • usufruct — another form of a long-term lease, but without the right to redevelop the property.

Expatriates planning to buy real estate in Dubai with freehold rights can only do so in special zones. However, this limitation is not as intimidating as it might sound. There are dozens of freehold zones in the city, all located in the best districts.

Palm Jumeirah. Photo by ckilger (Flickr)

Things to be considered before you buy

Before making an investment in the market of Dubai, one should set their goals.

What is the buyer's plan for the purchased apartment, townhouse or villa? Do the future investors plan to live in their Dubai real estate and rent it out for a short-term lease? Or do they consider a long-term lease? Is the plan to resell it as quickly as possible?

The most profitable option is a short-term lease. But that also implicates that the apartment should be fully furnished and the owner will be paying sufficient attention to it. If you are considering to invest in real estate to rent out your apartment for a year or even longer, you can do so with no furniture at all, because some clients in Dubai would prefer an empty apartment to an apartment with furniture that belongs to someone else. The income, compared to the short-term lease, is smaller but it is more reliable. And if the tenants violate their contract with you, they will have to pay you an interest.

Even if you buy a property for reselling, you can still rent the apartment out while searching for the right client, or waiting for the prices to grow. Selling an apartment or a villa that is being rent out is a normal practice on the secondary market. The only condition is that all interested parties have to be duly notified.

Golf Place (Housearch)

Once you have set your goals, you need to study the situation on the market.

You can gain a picture of the main trends by reading the latest news. Meanwhile property websites with listings will help you understand current availability and prices. When it comes to a new property, it is advisable to take a look, buy the property and handle all the documentation with the help of a reliable licensed real estate agent who can always propose alternatives. At the same time, we highly recommend that you get an idea of average prices first.

It is also useful to learn about general trends from the outset as the actual prices for different types of properties may differ from the prices based on the “overall picture”.

For example, flats in unfinished buildings usually cost less. However, in a situation where unfinished buildings are in high demand, it might be simpler and cheaper to buy a turnkey flat. In this case the client will not have to wait and rely on the developer's reliability as the flat can be let immediately and the owner can make money sooner.

Dubai Hills Vista (Housearch)

Another example. As a rule, it is easier to let or sell small flats. However, local experts note that during the Covid pandemic demand surged for bigger flats, townhouses and villas and as a result the prices for such properties rose. Everybody was looking for spacious housing where they found it easier to work remotely and seclude themselves from other members of their family.

Finally, the buyer must select a district and arrange viewings. It is best to do this when you are already in the country. No online articles, panoramic pictures from Google Street View or virtual tours will replace the real impression of seeing a property with your own eyes.

The price of a property is determined not only by the size, the floor, the class of the building and condition of the property, but also by its location. For example, an important factor in the letting of a flat at a higher price is the developed infrastructure, including the distance to the nearest underground.

Prices in Dubai by District

The most prestigious districts in Dubai are the aforementioned Palm-Jumeirah with its luxurious hotels and villas and Downtown, home to the famous Burj Khalifa. The price of  a studio flat in the world’s tallest skyscraper starts at AED 2,000,000 (USD 545,000). The prices of similar flats in nearby towers are two to three times lower.

The flats in the Business Bay district adjacent to Downtown and in Dubai Marina located off the Arabian Gulf are slightly cheaper. However, the prices at Jumeirah Beach Residence are comparable to Downtown prices due to the proximity of the canal and the city beach.

Dubai Marina. Photo by Bruce Kamm (Unsplash)

On the other end of the city and price range you will find the suburb Dubai International City  where the residential districts are named in honour of various countries. Prices for small studios start at AED 200,000 (USD 54,500).

Other cheap districts in Dubai considered good investment opportunities are Dubai Silicon Oasis, Dubai Sports City(built around stadiums and golf courses) and nearby Jumeirah Village Circle, which is usually abbreviated as JVC.

In JVC the prices of villas start at AED 1,500,000 (USD 408,000); the prices in Springs district are slightly higher. Anyone looking for more expensive villas should consider Damac Hills and Dubai Hills Estates.

Other Benefits of Buying Real Estate in Dubai

As well as quick income from the letting of a property and potential profit from resale, owning real estate in Dubai delivers at the very least two more benefits. 

Dubai does not levy personal income tax. In addition, there are no property, inheritance or capital gains taxes.

So even if you sell your flat or villa at a profit, you won’t have to make any payment to the local authorities. However, this doesn’t mean that foreign citizens are released from liability to pay taxes in their own country if required by the law. Please take note!

Furthermore, you still have to pay something. Dubai Land Department charges an additional 4% on the purchase of properties.

Marina Vista (Housearch)

In addition, you have to pay a small fee to register a long-term tenancy contract. You also have to pay utilities invoices for water and electricity in Dubai. However, you can transfer this burden to any tenants who live in your property.

Another benefit from investing in Dubai real estate is eligibility for a golden visa. Foreign property owners get a five-year residential visa that can be renewed. You become eligible for a golden visa if the total cost of your properties exceeds AED 2,000,000 (USD 545,000).

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In a Nutshell

Investing in Dubai real estate is always a serious matter. However, if you adopt the right approach, such investments will generate stable passive income, and if you choose the right moment, you can make a profit on the sale of the property. In the case of Dubai, owning a flat or villa is not only a way to make money: it also offers you an opportunity to live in one of the world’s most fascinating cities.

Cover photo: diana.grytsku (Freepik)

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