Investing in Dubai Real Estate

Since Dubai is a cosmopolitan capital, which brings together various nationalities and cultures from around the world, it is no wonder that the emirate is in high demand, and is one of the best destinations and places to live and work in.

With a loyal tax policy, strict legislation, rapid development, steady demand from tenants and a growing economy, Dubai is a great place to invest for the long term. Below we will highlight the benefits and potential pitfalls of buying property in the thriving emirate.

November 22, 2022

Why Investing in Dubai Property is profitable

Dubai's property market is showing signs of stabilization during 2022. The emirate's Land Department (DLD) has witnessed 1.3% year-on-year increase in the number and value of transactions. According to Economy Middle East legal and real estate consultant Dori J. Sakra, the strong growth in Dubai's real estate market will continue over the next 2-3 years.

Why wealthy investors should pay attention to Dubai real estate:

High yields

Investors can expect returns in the range of 5-9% per annum, while in Austria, the return on investment is 2.5-5%.

High capitalization

According to the ValuStrat price index, the average monthly capital gain for villas in Dubai in 2022 is 2.5% and 1% for apartments. Unlike Austria, where an investor must own the property for at least 10 years (otherwise a 30% tax on capital gains has to be paid), in Dubai, you can resell your residence at any time without a significant financial investment.

Remote purchase option

Licensed RERA brokers will help you select a property, guide you through all the stages of the sale/purchase transaction or hold it remotely on your behalf.

Easy access to capital

Expats can qualify for a mortgage at an annual interest rate of 3-6%. In case of an off-plan purchase, many developers offer convenient payment plans with a 5-15% down payment.

A wide choice of payment methods

Real estate acquisition in Dubai can be made by cash payment, bank transfer or cryptocurrency.

Attractive visa regime

From October 3, 2022, the threshold for foreign buyers to invest in real estate and obtain a 10-year UAE Gold Visa has been reduced. The amount is now from AED 2,000,000 (USD 545,000) instead of AED 10,000,000 (USD 2, 720,000). Individuals can also apply for a 3-year investor visa when buying ready-made property worth from AED 750,000 (USD 205,000).

A growing commercial real estate sector

Modern Dubai is an important international business center, since it has a high concentration of local and international banks and large trading and manufacturing companies. Due to a developed tourist sector, commercial properties are often used by upscale restaurants, cafes and nightclubs.

Economic growth

As revealed by the statistics center, Dubai's GDP grew by 5.9% during Q1 2022. The highest growth rate was recorded in the hotel sector at a whopping 47%. The tourism sector has also seen notable progress, with 6.2 million tourists having visited the emirate between January and May this year (2022), with hotel occupancy rising from 58.5% in 2021 to 73.1% in 2022.

High standard of living

According to the IMF's 2022 ranking, the UAE's economy is the most competitive among all Arab states. In the global rankings, the UAE ranked eighth out of 63 countries in Africa, Europe and the Middle East.

High income for both businesses and individuals

The average salary in Dubai is AED 21,000 (USD 5,700). However, doctors, pharmacists, engineers and lawyers can expect to be paid 2 to 3 times that amount.

A wide choice of property types

There are compact studios and apartments with 1-2 bedroom layouts, as well as opulent penthouses and villas. As a rule, small apartments are in high demand from investors. Spacious villas and townhouses are in particularly strong demand by expats in senior employment positions, such as general managers, directors and others.

Tax benefits

In the emirate, there is no capital gains tax, income tax, gift tax or inheritance tax.

High level of security

According to the results of 2021, the UAE is the second safest country in the world. The UAE has also been named among the top-10 safest countries for women in the Women, Peace and Security survey.

NBD! Over the past 3 years, local real estate has been highly popular with investors from India, Europe and Russia. And while 3 years ago studios and apartments were in the highest demand, now the interest of tenants is gradually shifting towards more spacious villas and townhouses.

Possible nuances of investing in Dubai's Real Estate

Investing in Dubai real estate in 2022 is a lucrative opportunity to grow your capital and earn a steady, passive income. Today, Dubai is a leading property destination and there are plenty of opportunities to get deals on better terms, including discounts or preferential maintenance. That being said, there are a number of peculiarities that are important to keep in mind.

One of the key disadvantages of investing in Dubai property, for many, is the high upfront investment. As mentioned earlier, foreign investors can get a mortgage loan from any of the UAE banks. However, you have to be prepared for a lengthy due diligence process and the need to provide various supporting documents, including bank statements, proof of source of funds, proof of employment, a place of residence and more. Even if approved, the bank is willing to finance up to 75% of the purchase price for a completed property and up to 50% for a property under construction. In the event that the lender deems your income level insufficient, they may require a higher down payment.

There is no property tax in the emirate. But you will have to pay a 4% DLD registration fee when you buy a residence. If the property was bought with a mortgage, the buyer will have to pay another 0.25% of the loan amount to the Dubai Land Department.

If the property is rented on a long-term lease, the connection and payment of all utilities is the responsibility of the tenant.

At the same time, owners must pay an annual maintenance fee for the development. These funds are used for the upkeep of common areas, cleaning of children's and sports grounds, major renovations of the building and other issues. The specific amount is determined by the developer, depending on the location and class of the property, and is calculated based on the total area of the property. The average annual rate ranges from AED 53 to AED 215 (USD 14.4 to USD 58.5) per sq. m.

NBD! There is no rent tax in Dubai. But there is a 5% fee which is automatically added to the property bill and paid by the person who is actually residing in the property.

Another important point is the need to engage with a lawyer or real estate agent. Without a licensed intermediary your transaction will be considered void. The agent's fee is the full responsibility of the buyer and amounts to 2-4% of the transaction price.

By contacting a representative of our company; Luxury Immobilien GmbH, you can count on full support when buying property in Austria and abroad. Our Austrian team, together with our partners in Dubai, can help you choose the most suitable property based on your purposes and budget. We will also advise you on the Dubai real estate market, which property types and areas are ideal for living and investing in, and help you put together your investment strategy, including property financing options.

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Anna Pilnikova
Real estate agent