Why Not To Buy Real Estate In Dubai
You can always find pros and cons on why not to invest in real estate. Well.. it always comes down to whether you’re willing to take a risk or not. Also, how do you identify whether it’s the right time to buy a property?
We get asked this question a lot – should I buy a property now?
And our answer is the following – if you’re comfortable and found I place you love – go for it! It’s not an expense, it’s an investment. If you’re not satisfied – rent it out and make passive income. If you love your place – awesome! Happy living!
To be honest, there’s no reason not to buy property in Dubai – unless you really “don’t like” Middle East and are afraid of investing in this area. Yes, Dubai’s economy has slowed down, which means lower real estate prices. But… Expo 2021 is The World’s Greatest Show and will for sure boost the local economy.
If you understand that buying property in Dubai is a good investment, I would suggest you invest in buying property in another part of the world as well. Remeber? You should diversify!
Perhaps you or your client looking to buy property in Dubai has a few questions about the best investment options in the Middle East and North Africa. I will address these issues so that you have a better understanding of buying and owning property in these areas.
If you are interested in investing in Dubai’s real estate market, it is important to consider the general drawbacks of acquiring real estate in Dubai before making an investment. There are a number of things to consider when buying property outside of Dubai, in addition to the purchase costs associated with the purchase.
What is a DLD fee?
For example, anyone buying a property directly from a developer must pay a mandatory fee to the Dubai Land Department (DLD) which is set to be 4% plus 580 AED admin fee (around 160 USD). Sometimes a developer offers DLD Waiver that means they will cover 50% or 100% of the DLD fees, so the buyer does not have to worry about this.
This shows that the most popular area for buying an apartment in Dubai is closely followed by the tree-shaped Palm Jumeirah district. Dubai Marina continues to be the number one destination for the purchase of apartments in Dubai, but luxury areas in Dubai are also gaining traction in terms of quality of life. You can find great investment opportunities such as La Vie by Dubai Properties at JBR with a really high ROI.
Compared to 2018, real estate prices in Dubai fell by a few percents for older properties, leading to higher transactions, which maintained the popularity of these areas. Comparing house prices in Dubai can help buyers and investors decide which part of the city they want to work in the next time they buy a house.
Luxury off plan properties in Dubai
The luxury portfolio of the emirate is second to none: according to the Dubai Real Estate Board, there are more than 1,000 fully furnished apartments in Dubai worth more than $1.5 billion. Luxury apartments in Dubai are more expensive than in other major cities in the Middle East and North Africa. To make it easier for buyers to invest in luxury properties in the United Arab Emirates, prime properties that meet or exceed the standards of these cities are often embedded in high-end real estate markets such as London, New York, Paris, and London.
Due to the high investment potential of these properties, Dubai remains one of the best cities to visit and live in. Tax-free income is another reason Dubai was entrusted to foreign investors in 2019. Now that the 10-year plan has been adopted, there are several other powerful motives for investing in Dubai’s real estate sector in 2018 and 2019. If interested, have a look at should you buy a off plan property in Dubai to learn more.
In short, we have seen a number of transactions following the announcement of the 10-year plan and the introduction of tax-free income in 2018 and 2019.
Indian investors are looking for alternative means to achieve higher returns, such as Dubai real estate investment trusts (RITs) like Emirates Reit.
The trend for Indians to invest in Dubai has increased massively in recent years, as property prices have risen exponentially. Indians led foreign real estate investment in Dubai in 2015, generating $12 billion in real estate transactions with 6,263 investors. Against this background, you should look at what Indians have contributed to the growth of Dubai’s real estate market in recent years, especially in recent months.
For investors who do not intend to live in the property and only want to take advantage of Dubai’s relatively high rents, according to brokers, the purchase usually makes financial sense for anyone who wants to stay in Dubai for seven years or more. He points out that the yield on residential property in Dubai is currently around 6.8 per cent. At the moment, purchases can still make financial sense, the broker says, but he says it usually makes no financial sense for someone to intend to stay in the UAE for five years or even longer, for those with a long-term plan.
Compare this to the average return on residential property in the United Arab Emirates, where it is between 3.7% and 4.5%, according to data from the Dubai Real Estate Board.
Indian investors can take advantage of the AED because it is pegged to the US dollar and unaffected by currency fluctuations.
The RBI’s liberalised remittance system allows them to legally transfer up to 1.5 billion rupees ($2.2 million) a year to buy a two-bedroom apartment in Dubai. Given recent studies showing that Dubai has become one of the most popular destinations for foreign investment in the world, it is not surprising that Indians are the leading foreign investors. Menon explains that registering real estate in Dubai is easier than in India, as you can obtain a residence visa within a few months after investing a million AED in a single property, such as a two-bedroom apartment or a three-bedroom apartment.
So why not to invest in Dubai?
If you’re not familiar with the market and don’t want to risk your investment – this market might not be for you. But if you are willing to risk and invest this market might bring you really positive investment results.
If you need more help – let’s chat! At Estati.ae we’re here to help you make a better investment decision!
2022 and 2023 Update
While investing in Dubai real estate can be tempting due to the city’s reputation as a global hub for business and tourism, there are some potential risks and drawbacks that investors should consider before investing. Some of these include:
- Economic volatility: Dubai’s economy is heavily dependent on oil and tourism, which can be subject to fluctuations and uncertainty. This can impact the stability and growth of the real estate market.
- Property market saturation: In recent years, there has been a significant increase in the supply of new properties in Dubai, leading to a saturation of the market and increased competition for buyers. With the Covid pandemic and an influx of residents – the market situation is reversing extremely fast and with not enough quality apartments. This is leading to an increase in prices and great returns for investors.
- Fees and taxes: Dubai’s real estate market is known for having some fees (such as Dubai Land Department fees which are 4% of the property value) and NO taxes. Some developers are also paying fees to make it easier for investors.
- Legal framework: The legal framework for buying and selling property in Dubai is very simple, but it’s important for investors to fully understand their rights and obligations before investing.
- Currency risk: Dubai’s official currency is the Emirati Dirham, and investing in real estate in Dubai can expose investors to currency risk, as exchange rates can fluctuate and impact the value of their investment. We also offer payment advisory and can find the best option for your transfer to save on transaction fees.
Ultimately, the decision to invest in Dubai real estate should be based on a thorough understanding of the market and careful consideration of the potential risks and benefits. It’s always a good idea to consult with an advisor such as Estati or one of our real estate experts before making any investment decisions.