Is Buying Property in Dubai a Good Investment?

If you are fiddling with the idea of buying or investing in a property in Dubai or other parts of the UAE, then don’t think twice. Dubai has emerged as one of the prime destinations to invest in real estate. However, before making any investment decision, it is important to find answers to all your queries.

Is Dubai a good place to invest in property?

Is it a good idea to invest in Dubai?

Can foreigners buy property in Dubai?

Are these the same questions bothering your mind? Don’t worry you are not alone. We will try to address all the questions. Along with this, we would also shed some light on the real estate market of Dubai.

To better understand the real estate investment in Dubai, we suggest you ask yourself the fundamental reason you want to buy a property in Dubai. Dubai offers all kinds of options for people buying or intending to buy a property. However, before moving ahead, let’s identify the reasons why people buy the property.

Why do people buy property?

Aside from following the age-old tradition of investing in property, there are several other reasons people purchase the property. Below are some of the reasons for investing in properties:

  • To live in a dream home.
  • For the purpose of investment, that can be sold off later.
  • To generate rental income from the house.
  • Property for business purposes.
  • Purchasing homes or lands for redevelopment purposes and generate income through profit margins.

Regardless of the category, you find yourself in, everybody dreams of owning a property. Even the humblest of people have the desire to own a roof on their heads.

Now let’s align all the above reasons with the real estate market in Dubai and try to understand why investing in real estate in Dubai is a good idea.

Investing in real estate in Dubai (UAE)

1. Buying property in Dubai as a family home

Staying in Dubai and outraged by the hefty rent? It is no doubt that a decent dwelling in Dubai may make a significant dent in your pockets. Ask any property advisor. They advise you to buy a home rather than renting one.

Now, the question arises, “Can I buy a home in Dubai, and utilize the rent money to pay the mortgage?” The answer is Yes. The law says if you are a salaried person and earn AED 15,000/month, you become eligible to apply for a mortgage. Many people have already got approval and already living in their own apartment.

Dubai’s real estate market has matured a lot in the last decade and has several affordable housing projects. While planning to buy a property to call it home, you need to check a few pointers.

a. Family-friendly neighbourhood

Whether you are married or unmarried, with kids or without, always prefer to look for a family-friendly community. Most factors that determine your buying decision, like safety, accessibility to various locations, are related to people residing in that neighbourhood. Prominent developers in Dubai prefer to design and plan properties that create a family-friendly environment. You can easily find public parks, supermarkets, restaurants, movie theaters, and schools at a comfortable distance. There is no second-guessing that the kind of people residing in the locality also influences the property’s resale value.

b. Cleanliness

Unless you are from the stone age, cleanliness should be a top priority. Dubai municipal corporation definitely has laws in place to ensure high standards of hygiene and cleanliness. The city does know how to keep its streets and community spotless. Thankfully, people also contribute to the cleanliness of public places. Dubai is a city that has several public events taking place each year. Whether it is the firework show near Burj Khalifa or national day functions, you may never witness even a piece of paper on the streets left by the people.

c. Basic infrastructure

The definition of basic may change from person to person, but good healthcare, education, and recreational facilities are common requirements of everyone. Dubai has got it all. From the best healthcare facilities, including a wide-spread network of medical justify, both government and private. The city also has some of the world-renowned schools and eminent international universities that have campuses in Dubai. The city is well-connected with public transport. Moreover, since Dubai Metro came in, regardless of what part of town you are in, there is no place out of reach.

Dubai spoils you for choices when it comes to recreational facilities. From cinema theaters to malls, to shopping, to play zones, we have the best of all in Dubai.

d. Safety

According to Curly Tales, Dubai is the thirst safest country in the world and second in the regions.  The global database of quality of life information has evaluated Dubai on factors like overall safety, security, health, crime index, and social stability. Thanks to the strict regulations and effective implementation, Dubai has maintained its position in the top 5 categories since 2012.

2. Buying property in Dubai for a holiday home

Dubai is unarguably one of the go-to choices of celebrities, businessmen, and commoners for buying a holiday home. Several properties are purposely developed to attract foreign investors. Some of the most preferred destinations are Palm Jumeirah, Dubai Marina, Jumeirah Beach Residence, and Downtown Dubai. These are some of the premium properties where celebrities like Beckhams, Giorgio Armani, Lindsay Lohan have holiday homes.

Foreign nationals are eligible to buy property in Dubai. However, foreign ownership is permitted in locations designated as freehold. Foreigners and expatriates may acquire freehold ownership rights over the property.

Freehold areas have many affordable options as well, where foreign nationals can buy a home in the city. There is no age limit to own property in Dubai. So, you can even plan to buy property for your children.

Buying property in Dubai comes with many perks.

a. Buy property and get a residence Visa

When you buy a property in Dubai, you can get a resident visa. However, to get a UAE residency visa, the value of the property you purchase should be equal to or above AED 1 million. If you are someone who frequently visits the city or love to have a second home here, having a resident visa can be beneficial. It allows you unlimited entries and exits from UAE till your Visa expires. You can always renew your Visa if you own a property in the UAE.

b. No VAT or property tax on your residential Dubai property

While commercial property attracts standard VAT of 5%, residential property is exempted from VAT. Apart from a one-time fee, there is nothing else required by the buyers to pay to RERA. So, for home buyers, Dubai still remains the tax-free haven.

c. It’s always Summer in Dubai

For people inhabiting colder parts of the world, Dubai is no less than a paradise. Sunny beaches, wild-life sanctuaries, water parks, and sand dunes are a great source of leisure activities. If you want to enjoy all these all year round, then Dubai is the place for you.

d. Countless leisure activities

Dubai has multiple options to explore, from the largest mega malls, tallest buildings, adventure parks, to a large number of gardens and parks. Dubai has something for everybody. Party never gets over in Dubai. Dubai offers you something to explore throughout the day and night. The nightlife in Dubai is the highlight of the city. You can attend night safaris, go for club hopping, dance bars, or just sit and enjoy at the clubs of your choice. There is so much to do in Dubai, and one gets baffled by choices.

3. Buying property in Dubai for investment purpose

Several people struggle with the question, “Is buying a house always a solid investment strategy?” What they fail to realize is that buying just any property cannot amount to investment. You need to evaluate a property on various parameters before it becomes potentially worthy of investment.

Investment is the primary reason why people buy property in Dubai or any other part of the world. Even the reasons, as mentioned earlier, also have a deep-rooted intention of investment behind it. Dubai is a mature real estate market and investing in real estate is the best way to park your funds. Moreover, if you chose to rent your property, you might earn a handsome amount every month. As per Business Insider, Dubai is one of the top 25 cities that have the most expensive rents.

Below are some points that back our view of Dubai as the desirable destination to invest in real estate.

a. Buying property in Dubai cost less

When you compare real estate capitals around the world, Dubai is many pockets friendly. The global property guide places Dubai in 27th position.

# City Buying Price US $ per Sq. M. Price/Rent ratio
1 Hong Kong $ 28,570 43X
2 London $ 26, 262 36X
3 New York $ 17,191 34X
4 Tel Aviv $ 17,149 37X
27 Dubai $ 5918 19X

Hong Kong tops the chart, followed by London, Tokyo, Toronto, etc. Even Mumbai is more expensive than in Dubai. We hope you notice the difference and how the most expensive places in Dubai are just $5918/square foot, which is quite reasonable compared to other places.

b. Tax haven

When you talk about the profit generated by a real estates entity such as sale or rent, there is no tax payable by the investor—even the yearly fixed taxes, which are prevalent in many countries, are not present. However, there are some minor taxes that you need to pay.

  1. When you purchase a property, either commercial or residential, you need to pay a one-time fee, which is 4% of the purchase amount. The fee is born by both seller and the buyer in an equal distribution.
  2. When renting a residential property in Dubai, there is a 5% tax from the tenancy contract value. For commercial property, it goes up to 10%.

c. Buying property in Dubai for rental yields

Now, let us assess the standard rental yield that investors can expect in their chosen property. The principal thing that we must know is the normal ROI % in these cities. Try not to stress; we got you covered.

# City Gross Rental Yield
1 Hong Kong Dubai 5.19%
2 London New York 2.91%
3 New York London 2.76%
4 Tel Aviv 2.68%
5 Hong Kong 2.35%

According to Global Property Guide, the above table mentions that average rental yield % in cities can help you evaluate the approximate rent you can expect in Dubai. Investigate the table, and you will understand that none of these megacities reach anywhere near the rental yield offered by Dubai.

Hong Kong, which undoubtedly is the most expensive city in every respect, offers just a 2.35% profit for your venture of $ 28,570. Dubai sits at the top with a moderate normal rental yield of 5.19%.

The average rent in Dubai varies depending on the location. In 2019, locations like Dubai Silicon Oasis (DSO) offered the highest gross returns, ranging up to 9.5% for residential apartments. It is followed by newly developed communities, Meydan and DAMAC Hills, offering a gross rental yield of 9.3% and 8.9%, respectively.

Town Square region had the strongest rental yield of 7.8% for villas and townhouses. Other regions like The Springs (6.6%), Reem-Mira (6.4%), and Mudon (6.3%) also gave good returns to house owners.

d. Resale of the smaller unit is much faster

In Dubai, small flats and apartments offer better value compared to larger sized properties. This is because the city has a significant expat population, which can afford to purchase these apartments.

How to invest in Dubai?

Real estate investments are always recommended for long-term investment in Dubai. Dubai is one of the most populated cities in the UAE, is a hub for property investors. There are several outlets to invest in Dubai. Apartments and residential properties are and will remain the popular choices because of high rental yields. Another outlet is commercial properties and investing in the hospitality industry. Dubai offers a unique opportunity to its investors to buy hotel rooms. Investment in hotel rooms is an innovative and enterprising way to invest in Dubai’s enormous tourism industry. The hotel room owners receive regular rental income when guests occupy these rooms.

If you are figuring out how to go about planning real estate investment in Dubai, consider these factors:

  1. Location:

Whenever you decide to invest in real estate market, location plays a crucial role. A good site brings lots of essential aspects like amenities, proximity to other primary locations, etc. Some of the most sought-after areas are Dubai Marina, Business Bay, and Barsha Heights.

  1. Real estate advisor:

Choosing a legitimate designer is significant as investing in a good location. Always select a company that has a good knowledge of the region and offers the best investment opportunities is crucial. Laws and regulations frequently change in the UAE, so hiring an agent can help you avoid potential legal troubles.

  1. Suitable developer:

The seasoned real estate agent will always guide you to the best developers. The properties developed by experienced and reputed construction companies always brings the best of everything.

  1. Legal requirements:

Buying or leasing a property anywhere in the UAE comes with a distinct set of rules and guidelines. Firstly, it is advisable to determine if you are legally eligible to invest in real estate in Dubai.

How to buy property in Dubai?

Now let’s step wise and understand how to buy property in Dubai:

The UAE government has simplified the process of buying property to a great extent. Nowadays, buying property is relatively straightforward.

  1. Finding a property to buys:

Depending on your area of interest, you can purchase either apartments, townhouses, or villas. Or you can go for commercial properties. Most residential dwellings in Dubai are generally located in gated areas with leisure facilities such as tennis courts, swimming pools, gymnasiums, etc.

There are a few pointers that you need to keep in mind when you are not a national. Since 2002 it is allowed foreign nationals to own a property in UAE. However, not all locations are accessible to them. Thus, ensure that you keep this in mind while looking for a property. There are several ways in which can assist your search:

a. Search online: As with all searches, the first search always begins online. The internet will get you the list of all major agencies and estate agents. You can always go to the RERA website to check if the agent is registered and check their credentials.

b. Contact specialist agent: Experienced agents can surely take off the burden from your shoulders and expand your knowledge about Dubai’s real estate market. All major property advisors have efficient staffs that can converse in English. So, language is not going to be a roadblock in Dubai the cultural capital of the Middle East. In general, an agent charges a fee between 2% to 5% of the property value.

c. Attend Property fairs: Dubai being the premium tourism and real estate destination in the Middle East, arranges frequent property expos and fairs. Property fairs are the most popular way for developers to exhibit and market their developments. Moreover, buyers can also utilize these events to find and evaluate all the best properties in the city.

d. Visit Dubai: This goes without saying that it is best to visit Dubai if you are a foreign investor before making any significant investment decision. 

  1. Meeting eligibility and financial requirements:

The Dubai government no longer requires you to hold any kind of residency permit to buy or rent a property in Dubai. However, you still need to have some documents like a passport to prove your identity. Other requirements are:

  1. You need to apply for “Property holders Visa.” This visa gets you six months to investigate the investments that you plan to make.
  2. The property you wish to purchase must have the valuation of AED 1 million or above.
  3. Only individuals can purchase the property. You can’t purchase property as a company in Dubai.
  4. While determining the cost of the property, consider the overall cost that you may incur. The overall cost must include purchase price, the deposit, transfer fee, agent fee, and potential fluctuations of currency exchange rates.
  5. It is unnecessary, but we advise you to hire a real estate lawyer or agent to help you negotiate.
  6. Newly build properties require a land registration fee of 2%.
  7. You can also apply for a mortgage in Dubai. However, getting a mortgage in Dubai is not an easy thing.
  1. Getting a mortgage in Dubai:

Dubai is still opening up to the latest financial reforms. Non-status and self-certification mortgages are still not available in Dubai. People who are accustomed to getting easy loans may find the long process and paperwork extremely off-putting. As a buyer, you may be required to put 20% to 50% of the mortgage in cash. Other things to know about the mortgage in Dubai are:

  1. You can pay your mortgage in easy monthly installments.
  2. The most common mortgage time is 15 years, which can go up to 25 years (maximum).
  3. The EMI, combined with other monthly expenditures, must not exceed 35% of net monthly income.
  4. Mortgage rules and guidelines frequently change in Dubai. There is a possibility even while reading this article; the rate may have changed. So, it is advisable to consult local agents, lawyers, or check online about the latest rules.
  1. Buying off-plan property in Dubai:

Off-plan property is an unconstructed property that you purchase directly from the developer. Usually, the buyer pays 10-20% when signing the Sales Purchase Agreement (SPA). The construction milestones dictate the subsequent payments.

There are several advantages of buying off-plan property in Dubai or anywhere in the UAE. Off-plan are relatively cheaper, you can sell the property at a higher price after completion, and you can negotiate the down payment’s value and timeline of payment.

When purchasing a property off-plan, you need to keep some basic pointers in mind, which are:

  1. You need to submit a reservation form that includes information on the payment plan, basic terms and conditions, and personal information of all parties involved.
  2. You need to submit a passport along with the reservation form.
  3. Educate yourself if your developer is selling you a leasehold or freehold title.
  4. You are required to pay all the deposits and payments to a RERA approved securities accounts for off-plan property. The payments are transferred to the developer by the authorities, and there is no direct transaction involved.
  5. Ensure the SPA includes the date of completion and the penalties the developer may incur in case of delay.
  6. The transfer deed is the final step to become the proud owner of a property in Dubai. On the completion of the project, when you pay 100% of the remaining amount, the developers transfer the property on your name.

Conclusion

Apart from lifestyle attractions, Dubai real estate offers some of the world’s most attractive rental yields. So, if you’re still considering, we suggest trying to gather more information. However, ultimately, you will realize that investment in Dubai’s property is one of the best decisions you can make.

There has never been a better time to invest in the properties of Dubai. Consistent new housing and commercial projects offer abundant choices to buyers. If you are looking to invest in affordable premium real estate in one of the mega cities, Dubai is definitely a solid contender.