Dubai has been (and still is) one of the most attractive regions for property investment in the world. Investors returned to Dubai after the pandemic and a decline in the real estate market. Dubai has remained popular because of the simple procedure for buying residential real estate, the never-ending influx of expats, and a variety of opportunities for managing your assets remotely from abroad. But is it the right time to buy property inDubaior should you wait for a better time? Read on to learn about the situation on the market, profitability, and investment prospects for the emirate.
New buildings in the UAE
Growing Market and Record Numbers
The UAE was one of the first countries to lift the COVID restrictions after the pandemic. Investors returned to Dubai as early as the second half of 2021. Since then, the emirate’s real estate market has been growing steadily and has seen record sales year after year.
As of the first half of 2023, Dubai is the world’s leader when it comes to the demand for elite residential properties. According to Knight Frank, in the first six months of the year, 176 luxury houses and apartments worth more than $10 million were sold in Dubai. The number already exceeds that of houses and apartments of the same segment sold in 2022. The $111.6-million sale of a penthouse in the Bulgari Lighthouse complex (currently under construction) is the biggest sale of the year so far. In the six months of 2023, $48.7 billion worth of real estate was sold, which is 55% more than in the first six months of 2022.
High demand leads to an increase in prices. For instance, the popular areas of Dubai Marina, Bluewaters, and Downtown saw apartment prices increase by 8%. On average, real estate prices in the emirate increased by 15%. These growth rates cannot fail to attract investors.
Nevertheless, according to Numbeo, the UAE has one of the world's highest indexes of housing affordability: the average price for a 90-metre apartment is around three annual incomes of a family. For reference, in the UK it is 8.3. In Dubai, prices per square metre are lower than in London, New York, Toronto, and Hong Kong.
High Profitability of Housing
Investors look for a good profit, and in Dubai they find it. In 2023, the profitability of studios and one-bedroom apartments is around 7% for long-term rent. As for short-term rent in tourist locations, it can reach 12% to 15%. Investors specialising in buying properties under construction and reselling them can gain up to 30% of the price.
Growing Number of Tourists and Expats
Dubai is a megacity of expats: they account for 90% of its population. 2022 saw a record number of newcomer residents. Economic and political crises in Europe are making foreigners look for ‘safe havens’ to live and put their capital in, so the long-term rent market of the emirate is unlikely to experience any decline in the near future. Dubai has seen a steady influx of tourists, too: beaches, amazing sights, entertainment centres, and skyscrapers attract more than 14 million tourists a year.
Dubai-2040, an ambitious development programme introduced by Sheikh Mohammed bin Rashid Al Maktoum, will help increase the interest of expats, investors, and businesses in the future and will offer developers new opportunities for construction. According to the programme, the population of Dubai is expected to grow by almost 100%. New areas will be built for locals and tourists, beaches will be extended and green areas will be expanded (they will occupy an unprecedented 60% of the megacity).
Sales Security and Infrastructure for Investors
Dubai is one of the few megacities in the world where everything is done for investors to work comfortably. The local government has ensured the simplicity and safety of property sales. The Dubai Land Department is in charge of controlling and registering sales and its representatives take part in sales performed remotely via video-conferences.
The government has also taken measures to prevent long-delayed construction:
- The developer has to buy the land before they start building.
- The buyers’ money is kept in an escrow account, the developer cannot access it before they complete the first stages of construction.
- 5% of the building’s price is kept in an escrow account for a year after the construction is finished in case something needs to be fixed.
There are other pleasant details for investors. For instance, in Dubai one can acquire real estate for cash or cryptocurrency, which is almost never possible in European countries. Mortgages and interest-free instalment plans are also available to investors. You will not even need to find your own tenants: developers and property management companies provide such services in Dubai. An investor can receive their profit remotely from anywhere in the world.
Risks and Investor Concerns
Investors often ask themselves whether to invest now or later. Let us have a look at the main concerns of those who want to invest in Dubai real estate.
Is the Market Overheated?
Media analysts often hurry to proclaim that any growing market is overpriced. After the 2008 global economic crisis, most investors now fear a market collapse.
Dubai has suffered two declines: in 2009 and 2016. The emirate’s government took measures to protect the economy and the rights of developers. Demand currently exceeds supply in the luxury residential property segment: the government controls development plans to prevent imbalance. Homeowners in Dubai are not allowed to drastically increase rent: they only can raise it once a year and no more than by 15%. This controls rent increases.
In 2022, Dubai did not feature on the list of ‘bubbles’ by UBS, a Swiss financial company and so Dubai real estate cannot be considered overpriced. Dubai’s real estate market is seeing slowing levels of growth. In 2021, there was a 176% increase in the number of property sales compared to pre-pandemic numbers. There was a 76% increase in 2022 and the first six months of 2023 have seen a 44% increase.
It Is Impossible to Sell on Secondary Market
Another common concern among investors is that their apartments will lose value after a few years of renting and they will not be able to profit from selling them. As a matter of fact, the secondary market in Dubai shows the same numbers as the primary market (50% of sales in the first six months of 2023).
A Change in Policy Towards Expats and Foreign Buyers
The profitability of real estate in Dubai depends on the influx of expats and tourists. If the government decides to take a stricter approach towards foreigners, investors will leave the market, and the government of Dubai understands this. Migration policies are regularly loosened. Expats and investors continue to obtain residency in the emirate for work, study, and investment. After purchasing real estate worth more than 750,000 AED ($204,200), one can get a resident visa for two years, and after investing more than 2,000,000 AED ($545,000) an investor can get a Golden visa for 10 years.