Dubai real estate
offers some of the most attractive rental yields in the world. If you’re
considering an investment property read on for all you need to know about
investing in Dubai.
property is a great way to build wealth and generate income. However, all
investments carry risk and there are many factors to consider before investing
in Dubai’s real estate market to ensure you yield the highest possible returns.
Why invest in Dubai?
- The city offers higher rental yields than many other mature real estate markets. On average,
investors can achieve gross rental yields of between 5-9%.
- Property prices per square foot are lower than many other
cities globally, making Dubai an affordable
location to own prime real estate.
- New visa laws linked to property investment enable investors
to gain a residence visa subject to certain conditions. For properties valued above AED 1 million, you may be
entitled to a 2-year residency visa. For properties valued above AED 5
million, you may be entitled to a 5-year residency visa. While for
properties valued at above AED 10 million, you may be entitled to a
10-year residency visa.
- Highly favourable tax conditions in particular, the absence of property taxes and stamp
duties, that are applicable in other global real estate markets, also
paints the city as a highly attractive investment environment.
What to consider when selecting
an investment property select an investment property
Strong return on investment (ROI) is the ultimate
goal when investing in property. Securing a property which delivers healthy
rates of return requires proper due diligence from the outset. Here are some of
the factors that can influence ROI:
- Facilities and amenities available in the community,
including proximity to transport, education, childcare etc.
- Market conditions and timing of purchase
- Interest rates
- Maintenance costs (RERA Service Charge and Maintenance Index)
to invest for high ROI
In the first half of 2019, Dubai Silicon Oasis (DSO) offered the
highest gross returns of 9.5% for apartments. New communities, Meydan and DAMAC
Hills closely followed, offering gross rental yields of 9.3% and 8.9%
respectfully, again for apartments.
For villa and townhouse communities, Town Square yielded the
strongest gross returns at 7.8%, followed by The Springs (6.6%), Reem – Mira
(6.4%) and Mudon (6.3%).
for achieving strong ROI
typically provide stronger rental yields than townhouses and villas
due to Dubai’s largely transient, low to mid-income population with a
budget geared toward smaller, affordable homes.
- Opt for
smaller sized apartments (studio and 1-bedroom) in affordable
established infrastructure, near to transport and essential amenities such
as education and healthcare.
of smaller units is faster and offers a better value compared to larger sized
properties, mainly because a major segment of Dubai’s expat population can
afford to purchase these when the investor wants to release equity.
- Annual maintenance charges
payable to the Dubai Land Department based on the RERA Service Charge and
Maintenance Index can materially impact overall returns. This index
determines a specific charge per square foot and varies by community. Up
to date fees can be sourced directly from the DLD’s website. Research the
applicable charges for your preferred community before investing.
property vs. ready property
Investing in off-plan property or ready property in the
secondary market each have pros and cons. Each individual’s financial situation
and risk appetite is unique, and as such, it is important to adequately assess
the risks associated with both.
Pros of buying off-plan
- Price: Buyers commonly receive a price
advantage with under-construction properties priced significantly less
than ready properties.
is a high probability of the property increasing in value near to completion
deposits of 5-10%, as opposed to 25% with ready properties, can make
purchase more achievable.
offer highly attractive, flexible payment plans, in some cases offering
post-handover 2-5 year payment plans meaning you can actually rent the
property out before commencing the repayments.
Cons of buying off-plan
in market conditions: Downward movement in prices may result in the property
being valued at less than the initial purchase price.
or cancellation: There
is of course the risk of projects being cancelled, or completed after
their scheduled date. To mitigate this, it’s vital to conduct independent
research on the developer to verify their track record and reputation.
Pros of buying ready property
- Price: Price advantages may arise
relevant to market conditions at the time. In a buyers market, it might be
possible to buy a property at a significant discount. At the moment, as
the market continues to correct itself and new supply enters the market
causing prices to dip, buyers have the ability to bargain.
- Location: Ready property is often in
prime locations with completed infrastructure in place.
can start earning rental income from the moment a tenant is found.
rental yields: Investing
in ready property often provides the added benefit of proven rental
Cons of buying ready property
- Down-payment: In line with UAE Central
Bank regulations, the minimum deposit required for expats is 25% of the
purchase price for properties valued at less than AED 5 million, and 20%
costs: Upfront transaction costs can be estimated at approximately 7-8% of the purchase price
- Time: If obtaining a mortgage to
finance your purchase, it’s important to take into consideration the
turnaround time of your chosen bank.
There has never been a better time to invest in Dubai.
Consistent new supply offers buyers a plethora of choice and continues to
steadily drive prices down to more affordable levels. If you are looking to
invest in affordable prime real estate and achieve strong rental yields, look
(This article was previously
published on Property Finder)