UAE Real Estate: Investment Potential

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In the United Arab Emirates, there is an attractive investment climate. The country is constantly developing and attracts foreign direct investments. The Arab state ranks among the world leaders in investment attractiveness, and three years ago, the Emirates ranked 15th in terms of the volume of foreign direct investments. Good investment opportunities are demonstrated by construction and real estate in the UAE.

Who, why, and for what purpose buys property in Dubai

There are several categories of foreigners investing in Arab real estate. The first category includes those who want to become residents. In Dubai, it is very easy to obtain such status. It is enough to purchase an apartment for 750 thousand dirhams (just over 200 thousand dollars). For such an investment, a visa valid for two years is issued. A person gains the opportunity to legally stay in the country, receive medical and educational services, use banking services, etc.

Investments in local real estate are also made with the aim of making a profit. The profitability of houses and apartments in Dubai exceeds any bank deposits. Currently, the market is experiencing a boom, which in some cases provides profitability of around 50% per annum. However, it should be noted that such a situation cannot last indefinitely. The recent real estate market crises were in 2008 and 2014.

Residential and non-residential real estate in the Emirates is purchased due to its relative affordability. In Dubai, it is cheaper than in New York, Singapore, and, in some positions, Moscow.

Dubai Real Estate Market

Since 2021, the situation in the real estate market in the emirate can be described as a boom. Local publications constantly report on new sales records and growth prospects. However, not all experts share this optimism.

For two years now, the real estate market in Dubai has been growing, with each quarter showing higher performance than the previous one. Information from DXB Interact indicates that in the first months of 2023, the real estate market broke a nine-year record. This applies to both the number of transactions and the volume of sales. In total, transactions amounted to almost 89 billion dirhams.

Cost of Real Estate in Dubai

By the end of the third quarter of 2023, the cost of one square meter in apartments under construction averaged around $5,300. As for the most popular areas, the situation is as follows (per square meter/per apartment):

LocationPrice per sq. meter, USDApartment price, USD
Motor City3,229182,000
Meydan City4,314294,000
Dubai Hills5,727560,000
Business Bay7,545587,000
Dubai Marina13,672

For comparison: in the center of Moscow, the price per square meter in new buildings exceeds 5,000 dollars.

Yield and Return on Investment in Dubai

Dubai is like a magnet, but instead of iron, it attracts money from all over the world. Investments come here from practically every country on Earth, with residents of the European Union, China, India, and Russia leading the way.

Currently, we can observe a construction boom in the emirate. The government has adopted a program according to which by 2040, accelerated development of three existing and two new districts is planned in Dubai. The city's development plan involves not only the construction of new housing. For example, green and recreational areas will increase by 60%, public beaches by 40%. The area of land allocated for hotels and tourist facilities will increase by 134%, for education by 25%. An additional 168 square kilometers will be allocated for trade and commerce. As a result, new construction starts almost every day, and foreigners can become full-fledged owners of both finished real estate and properties under construction.

When purchasing residential and commercial properties, one can not only preserve money but also multiply it. The UAE economy is stable and shows constant growth. Therefore, real estate gradually appreciates in value. Additionally, there are no annual property taxes in this country, but a registration fee of 4% of the appraised value will be required.

What Real Estate in Dubai Provides

The primary benefit of owning real estate is the opportunity to obtain a residency visa. If all requirements are met, one can obtain a "Golden Visa" within a month. However, this requires purchasing property worth 2 million dirhams (approximately $550,000). In the Emirates, this is equivalent to a residency permit, allowing one to live in the country for up to 10 years. The same status can be obtained by family members of the investor.

Additionally, there are other advantages to property ownership:

  • High demand, leading to further price growth, ensuring high profitability.
  • Security. Transactions are regulated by the government and can only be concluded with licensed developers or through reliable intermediaries.
  • Variety of housing. Various properties are actively being constructed in the country, offering options in both budget and luxury segments to suit any taste.
  • Possibility of obtaining loans.

However, before purchasing real estate in the UAE, it is necessary to weigh all the pros and cons.

Conditions and Features of Purchasing Real Estate in Dubai

Each case may have individual features, but generally, the scheme looks as follows:

  1. The investor selects a property that suits them.
  2. A purchase and sale agreement is signed between the seller and the buyer, reflecting the rights and obligations of both parties.
  3. A deposit is made at the time of signing the agreement (usually, the amount is one-tenth of the transaction value). Often, the prepayment is transferred to a real estate agency. The money is held in their account until the transaction is completed.
  4. The seller obtains permission from the developer to sell the apartment. Essentially, this permission is a statement that the seller has no outstanding debts to the developer.
  5. After receiving permission, the buyer and seller register the property under the new owner. This occurs at the Land Department. In most cases, the final settlement between the parties also takes place at this time.

If the property is not yet occupied, it is registered in the temporary register at the Land Department. In this case, the buyer receives a preliminary purchase and sale agreement. After the building is put into operation, the new owner receives a registration certificate based on the preliminary purchase and sale agreement.

In general, at the Land Department, you will need to pay 2% of the transaction value for the transfer of property rights. Additionally, a fee of approximately $100 will be required for issuing the certificate. The Level Consulting can help you navigate all the nuances of the transaction process. By turning to the company's experts, you can expect assistance in all types of transactions, including any real estate matters in the UAE.

What to Consider When Buying Property in Dubai?

Dubai is the most popular emirate in the UAE among investors. Over the past decade, property prices here have increased by 50%. Along with this, the number of property transactions is also growing. In 2022, 97,252 transactions were concluded, almost 60% more than the previous year. Further growth is also forecasted for 2023.

However, it's important to note that foreigners can only purchase property with full ownership rights in specific zones (freehold zones), of which there are approximately 50 in Dubai. In these areas, foreigners can dispose of property as they wish: renovate, sell, rent out, inherit, etc.

Additionally, the following points should be taken into consideration:

  • Apartments are purchased more frequently than villas (if needed, they will be easier to sell).
  • Apartments are a lucrative asset, generating up to 8% annual returns when rented out in Dubai.
  • Popular areas in the emirate include Dubai Marina, Downtown Dubai, Business Bay, Jumeirah, and Dubai Creek Harbour (demand for housing is higher in these areas, making it easier to rent out).
  • Coastal villas are predominantly in the secondary market. New areas are a quarter-hour drive from the sea.
  • On average, the price per square meter of housing is around $7,200, but this can vary significantly depending on the area (by 4–5 thousand in either direction).
  • The maintenance cost for an 85-square-meter apartment will be around $3,200 per year.
  • To obtain a residency visa, a minimum investment of 750,000 dirhams in purchasing real estate is required.

It's important to consider all these factors to understand the expected outcomes from property purchase, especially if it's intended for investment profit.

Investment Potential of Real Estate in the UAE

The Dubai real estate market is not a closed system; it grows because the government creates mechanisms to attract foreign investors. Many large companies have already moved to the Emirates, and the region is also attractive to both professional and non-professional investors. People come here to diversify their assets to protect their money from inflation.

Dubai is a place where many properties are being built. There are both budget options and luxury properties. Investments promise to be highly profitable due to interest-free installment options. Even foreigners can expect various benefits.

Based on all this, it can be concluded that the Dubai market holds promise. It will continue to grow for some time. When the next crisis occurs, nobody can predict. But in any case, after it, a period of growth will follow, as was the case in the UAE in 2009 and 2015.

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