Why do you NEED to pay attention to Dubai's Real Estate Market? (6 Interesting Facts)
Throughout the last two decades, Dubai has evolved into one of the hottest and most attractive destinations for both people and businesses in the world. The reasons behind the city's extraordinary success in attracting foreign capital, investments, and talent are numerous and by no means the list below should be considered an exhaustive one.
However, we've compiled a list of some things that have stood out to us the most when analyzing Dubai's growth trajectory and more specifically that of its real estate market.
As real estate developers and investors, we are constantly looking for attractive opportunities to add value to a particular market by introducing new products and services that could further accelerate the already established trends. I hope to bring valuable insight your way and show you why Dubai, should be not only on your travel list but also on your real estate investing list as well.
1. No Property Tax Imposed
The United Arab Emirates is one of the few countries in the world that does not impose a property tax on property owners both local and foreign. As a city and emirate in the United Arab Emirates known for luxury shopping, ultramodern architecture, and a lively nightlife scene, Dubai has also gained a lot of attention for its fast-evolving and growing real estate market. The absence of property tax has played a key role in uplifting the demand for property in Dubai.
2. The Return on Investment in Real Estate
Dubai offers superior property yields than popular cities such as London and New York, with a gross rental yield of between 6-10% and an average return of average 7.5%. The property prices in Dubai are also competitive versus other major international hubs like London, New York, Hong Kong, Paris, and Singapore.
If you are planning to attain a property in Dubai to rent it out, then you shouldn’t wait any longer.
3. Freehold and Leasehold Areas
The government of Dubai has broken up the areas into 2 categories. The freehold and the leasehold areas. In the freehold parts, anyone from any corner of the world may own the property, also giving the owner complete freedom of how he chooses to manage/lease it into the future. The leasehold areas on the other hand are those where foreigners may only lease the property for up to 99 years.
The locals may, however, own a property in either area.
4. The fee Associated with the Purchase of Property
There are 3 separate fees for acquiring a property in Dubai, which are all relatively low when compared to international standards.
• Real Estate Dealer’s Fee — The standard rate of the agent’s fee is 2% in Dubai
• Dubai Land Department’s Fee — The buyer is liable to pay 4% of the purchase price of the property to the Dubai Land Department (DLD)
• Registration Trustee’s Fee — The Registration Trustee’s office is the place where the transfer of the ownership takes place. The trustee’s fee is AED2,000 on the price below AED500,000 and AED4,000 on the price above AED500,000.
5. The Variation in the Prices across different neighborhoods
As a result of its fast uprise Dubai’s real estate market has become one of the markets with the most variable rents per annum. There is a well-defined segmentation between different parts of the city offering drastically different price points. This creates a variety of great opportunities for both small & large real estate investors.
The cheapest areas are:
· The International City
The typical rents for apartments in these areas range from AED25,000 ($7,000) up to AED75,000 ($20,000) annually
The most expensive areas are
· Old Town
· Palm Jumeirah
The typical annual rent expense for apartments in these areas ranges from AED95,000 ($26,000) up to AED160,000 ($44,000).
6. Around 85% of the Population is International
It is true that Dubai’s economy has been quite volatile as 30% of the UAE's GDP is directly based on the oil and gas industry, which are also responsible for 13% of its exports. And we all know that commodities are some of the most volatile assets on the planet, and their price swings can definitely cause a lot of headaches worldwide. However, where there is volatility there is opportunity. The phenomenal growth opportunity in Dubai is what has turned it into one of the most attractive economies worldwide. Nowadays, only 10% to 15% of the population is Emirati, the rest is foreign.
This trend is closely related to the rapid growth we’ve witnessed in Dubai’s property market.
You see, Dubai is welcoming people, investors, and businesses from all over the world, which inevitably creates a huge demand for housing and accommodation. This is great for real estate agents, developers, and property managers.
2023 is going to be a challenging year from an economic, political, and social aspect as there are many different forces and developments coming together at the same time. For hundreds if not thousands of years the real estate market has proven to be one of the safest investment vehicles for both small and large investors to not only preserve but also drastically grow their wealth. However, all real estate is not created equal, and choosing the right market, the right type of property and the right partners could make the difference between building a successful real estate investment portfolio and/or business and making the worst financial decision in your life.
Happy Holidays, everyone!
Stay safe out there and let's make 2023 the best year ever.