In the last year, interest in the Dubai real estate market has grown nearly four-fold. The emirate has become one of the world's most popular locations for foreigners to buy real estate.
Most foreign citizens buy properties in the UAE for the purpose of profitable resale or leasing, but there are also those who plan to stay in the country. In either case, it’s important to understand the nuances of Dubai’s real estate market.
Types of Real Estate Ownership in Dubai
There are several types of real estate ownership in the emirate of Dubai. However, not all of them are available to foreigners. Let's take a closer look at the most common ones.
- Leasehold is a form of real estate ownership (or, a form of use, to be more precise) that is a sort of long-term lease: the buyer acquires the rights to use the property for a very long time, up to 99 years. They have the right to redesign and rebuild the property, remodel it and make other changes as well as the right to sublet it. This type of ownership is available only to citizens of Gulf Cooperation Council (GCC) countries.
- Freehold is the most common type of property rights for foreigners. It gives one full ownership of real estate, i. e. the real estate owner can sell, bequeath, or rent the property out. They are also given ownership of the land on which the apartment building, townhouse or cottage is situated.
Such acquisitions also give the owner the advantage of the right to apply for a UAE residency status, depending on the value of the property. Buying a property at the price of 750 AED ($204,000) or more gives you the right to a 3-year residency visa. The investor can choose a finished property or real estate under construction from an accredited developer. Applicants are also eligible for a mortgage if the down payment is more than 50%.
Purchasing real estate can also provide a Golden Visa, which is issued for a term of 10 years. The minimum investment of one’s own funds in this case must be at least 2 million AED ($545,000).
There are special areas in Dubai where it is possible to purchase Freehold properties, and although the number of these areas is increasing, they are still limited. In total, the emirate has more than 70 free zones where foreign citizens can obtain full ownership of properties. Elsewhere in the country, expats only have the right to rent.
Acquiring Freehold property is more expensive than acquiring Leasehold property, largely due to the location of these areas and their prestige.
Most homebuyers need only be acquainted with Freehold properties, but we shall briefly discuss two more types of property rights that an interested investor or buyer would do well to know.
- Musataha is the right to use, develop and profit from a piece of land over a period of time. This type of property ownership is used mainly by developers. Usually, the period of use of the land does not exceed 50 years, but it can be extended if necessary.
Upon signing a Musataha contract, the developer gains the right to build a property in Dubai on a specific piece of land. In this case, all the buildings on this plot belong to the developer and they can manage them at their discretion.
- Usufruct. This type of property ownership is similar to Leasehold: the property is leased for a long term of up to 99 years. Usufruct allows free use of real estate and receiving income from it, but prohibits any modification of the property (major repairs, redevelopment, reconstruction and rebuilding).
Besides the aforementioned, real estate buyers in the UAE (especially those who plan to rent out properties) should know about the Ejari system. All leases are subject to online registration through this system. It is designed specifically to protect the interests of tenants and landlords, and it is impossible to rent property in Dubai bypassing the Ejari system.
New buildings in the UAE
Types of Property Available For Purchase in Dubai
The types of real estate in Dubai are not dissimilar from those in Europe. One can buy apartments, townhouses, penthouses and detached houses.
Apartments are most popular with foreigners since they are both the cheapest and most compact options. Foreigners rarely relocate to Dubai with large families, so their interest in villas, penthouses and apartments with multiple rooms is much lower than in small apartments. Besides providing a more comfortable living space, smaller apartments are also easier to lease.
Apartments. As a rule, these are spaces with one or more bedrooms, a living room to host guests and a kitchen (either separate or in a room together with the living room) and one or more bathrooms.
Dubai’s market ratio of apartment formats is roughly the following: about 17% are studios, 60% have one bedroom, 13% have two bedrooms, 5% have three bedrooms and 5% have four or more bedrooms.
Micro studios are the cheapest option. In this category, demand is greatest for apartments of about 30 sq. m.
The most popular type of apartment is one bedroom, a living room and two bathrooms (master and guest). Such spaces are usually about 70 sq. m. Another common apartment type is those of about 150 sq. m. with two bedrooms and a living room. They usually have three bathrooms (one near each bedroom and an additional one for the guests).
Multiroom apartments are usually large, about 230 sq. m. and the number of bathrooms is equal to the number of bedrooms.
Penthouses. These are one- or two-story apartments on top floors of skyscrapers. They represent the premium type of apartments in Dubai. Penthouses are large (300 sq. m or more) and they are often sold with expensive furniture and design. Their main advantage is their views.
Villas. The main buyers of this type of real estate are Arabs themselves, but foreign buyers appear in this segment of the market as well. These are luxury, high-priced properties. They can be located in prestigious areas or by the sea and have their own entry to the beach. A villa usually has a garden and a pool and the house can have up to 10 bedrooms.
The most compact villas on the Dubai market are those of 150 to 170 sq. m. with two bedrooms and three bathrooms. Houses with three to four bedrooms are 200 to 400 sq. m. There are also even bigger properties of up to 500 to 600 sq. m.
Townhouses. This is a cheaper villa option and a fairly common type of property in the UAE. The townhouse is a two- or three-story house for multiple owners, where all residents enjoy a separate entrance from the street and their own small plot of land in front of the house. Many townhouses in Dubai, like the villas, are built by the sea.
Dubai’s Most Promising Neighborhoods
Like everywhere else in the world, Dubai’s housing prices vary by district. One of the most popular districts among major investors is the artificial Palm Jumeirah archipelago, where prices have risen more than 75% since the beginning of the pandemic. But the prices in this district were not for everyone even prior to the pandemic.
More budget-friendly investments are available in the area of Jebel Ali, where in the Discovery Gardens community or in the International City community, for example, you can find apartments from $100,000 and up.
Photo by Roman Logov (Unsplash)
The Dubai Sports City community on the outskirts of Dubai, where residential properties are actively being built, is popular among investors with smaller budgets. This new community occupies a large territory with plenty of greenery. The Dubai Silicon Oasis community, close to Dubai’s best colleges and universities, is also popular.
A more expensive option, though one with a near-guarantee of rental income, is an apartment in the Downtown Dubai area, tourist center of the metropolis. Housing here can generate an annual profit of 7% or more.
A solid investment would be an apartment in the business center of Dubai, known as Business Bay, where there are mainly office buildings and only a small section is occupied by residential complexes.
Business Bay. Photo by Thomas Winkler (Unsplash)
Apartments in the MBR City area are also popular where, in addition to high-rise apartment complexes, medium-rise housing projects are also in development. Schools, children's centers and sports facilities are also nearby. Dubai Marina, located along the coastline, is also gaining popularity among foreign investors and tourists alike.
Real Estate Prices
According to information from the Dubai Land Department, this year foreigners have purchased a record number of properties in the emirate. The citizens of India, Great Britain, Italy and Russia rank among the top four on the list of those buying residential real estate.
Residential real estate prices have grown with this demand. At this time, a small budget of $65,000 to $85,000 can afford a 30 to 60 sq. m. studio currently under construction in the suburbs or one sold without furnishings.
Prices for other real estate are even higher and growing. According to CBRE, in the first quarter of 2022 prices increased by 11.3 % on average. The prices of small apartments, ones for a middle-sized budget, can go as high as $200,000. The prices of elite apartments can reach several million US dollars.
According to the Dubai Land Department, in October 2022, the average price for 1 sq. m. in a newly constructed building was $5,600.
However, there is good news: analysts suggest that prices will soon stabilize due to finite demand and the construction of new properties. By the end of 2022, the rate of increase in apartment and housing prices will drop to 6.5% and drop to 3% by 2023.
In A Nutshell
As in Europe, in the UAE one can choose real estate to suit any taste and budget. Foreigners can buy apartments, villas, penthouses and townhouses, they can take out a mortgage and choose a comfortable neighborhood in which to live. The most important thing to remember is that all contracts must be registered in the Ejari system.
Cover photo: Noah Bikoro (Unsplash)