Investment in Dubai: All about Advantages and Disadvantages

9:57 am  |  17.08.2023

Due to the favorable conditions, it is very tempting to invest in Dubai’s residential real estate market. Today we will tell you how to invest in UAE facilities and what to consider depending on the selected goals.

Brief Information About the Dubai Real Estate Market

Low Entrance Threshold. Premium housing in the Emirates is cheaper than similar facilities in New York, London, Hong Kong, Paris, and many other cities.

No property taxes. Just pay the registration fee.

High ROI with Real Estate Rental. ROI – Return on investment rate. The average ROI of Dubai real estate is 5-7%. It should also be mentioned 0% tax on profits, wages, capital gains, and dividends.

You can qualify for a long-term visa by purchasing a property for AED 753,000.

In general, all conditions for growth and development. This comfortable environment created by the State stimulates the demand for housing in the Emirates. And so, the liquidity of facilities in Dubai – one of the highest in the world. But what risks exist?

Long-Term Investing

Dubai Marina

You can buy real estate and invest your money saving it from inflation. And you can buy an object for further rent. For the first option, it is important to choose the most promising option in terms of cost increases. This way you will save your investment, and in the future, you can even earn on the difference. 

READ: 4 Districts You Shouldn’t Invest In: Prices Are Falling

Proposals begin with the most budgetary options. Dubai real estate is built to the highest standards. It usually includes several swimming pools, gymnasiums, and playgrounds for various sports, as well as their own harbors, barbecue area, and work, and recreation area. 

If you decide to buy a house to earn on the rent, it is important to slow down at the first stages – perhaps, to draw up a minimum financial plan, which will calculate all the income and expenses of such an enterprise. You should also consider options for both long-term purposes and daily rent. This will determine which object you need in the end.

For example, the most popular area for rent for several years in a row – Palm Jumeirah. And it is not surprising because this unique man-made island in the form of a tree has become a kind of symbol. And it is clear that wealthy tourists want to settle on the islands. Despite the increase in prices, the demand for housing in Palm Jumeirah is only growing. But the prices for such facilities are appropriate.

Short-Term Investment and Resale Income

Dubai Creek

It is known that the facility at the stage of building is a couple of tens of percent cheaper than the finished version. And you can make good money on this. In the case of Dubai, you can not even pay the full amount when you buy the facility.

For example, the apartment from the developer cost about $600,000. The first customer added 5% to the price and earned almost $30,000 without even buying the entire apartment. 

And if you buy property at the building stage, and sell at the end of the construction, the additional interest can be many times higher – on average about 20% of the original cost of housing.

How to Pay for Property in Dubai

We have already touched on this point. One of the main advantages of the Dubai market is that real estate can be bought in installments at 0%.

READ: Where East and West Meet: Millionaires Feel Comfortable in the UAE

There are two types of installments:

  • The first is rent-to-own. This type of installment is valid for the finished housing – you live in an apartment or villa and pay rent, which goes to repay the contract. Usually, these payments are higher than the market, but after the payment of the entire amount the property will transfer to your property. 
  • At the building stage. The payment is divided into two parts: up to 70% of the cost of housing is paid on a payment schedule, and the second part is paid only after the delivery of the house. It reduces the risk of getting into «unavailability» and stimulates developers to strictly adhere to deadlines. 

An important advantage – the property in installments can be sold without paying the full amount. This way you will receive investment income, as well as a residence permit.

A UAE visa can be issued for a period of 5 to 10 years. It allows you to live and work in the Emirates. It can also be extended indefinitely. Property owners in Dubai can make a UAE visa for every family member, use banking services, and conduct business. 

Investing in Dubai Real Estate Can’t Be a Very Good Idea in All Cases

Dubai’s real estate is not as panacea as it appears. And the purchased object can bring not at all the profit you had hoped for, and in the most neglected cases will become a loss-making idea. 

When buying real estate for investment it is important to understand the ROI indicator or profitability of invested money. Simply put, it is a measure of how much you get for each invested dollar, taking into account all taxes, contributions, fees, and repairs.

READ: Jumeirah Village Circle: One of the Most Attractive Investment Districts

A good value for Dubai is 5-6% per annum. For luxury properties, this figure will be 8%. If you are promised income of two, three, or four times these values – do not believe. In addition, it is important to bear in mind that even averages may be lower. The property is closely related to the market. Plus, the income depends on the demand for rent, which also has a seasonal.

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