by Naya Properties 
Investing in real estate in a busy city like Dubai generates substantial profits. A foreign investor in Dubai can not only count on a payback period of 10 to 20 years, but also on obtaining a residence permit. However, for a successful purchase, you need to know exactly how the Dubai real estate market works.
In this article, we explain why it's worth investing in Dubai real estate, how to avoid the risks and what factors to consider when making your choice.
In Dubai, real estate is considered the most profitable investment. There are several reasons for this:
- No income tax.
- High standard of living and safety in the city and in the country as a whole compared with many other popular destinations.
- A stable economy unaffected by the pandemic and political conflicts. According to analysts, it will grow by 4.5% in 2022.
- The cosmopolitan nature of the emirate: only one of the 23 employees here is a citizen of the United Arab Emirates, the others are expatriates from other countries who integrate successfully into the environment.
- The simple process of buying and registering a property.
- Equal conditions for all expatriates (when buying a home in a free zone).
- Steady price growth: a well-chosen property in Dubai will cost more over time. For example, in 2021, the cost of residential units rose by an average of 42.2% and, according to experts, will continue to grow.
- An option for earning passive income and obtaining a resident visa.
- Flexibility in terms of ownership: the home can be bought and resold at any stage of completion.
Dubai has become a popular destination to buy a second home according to a recent survey of over 12,000 respondents, thanks to its infrastructure, a successful strategy to combat pandemic and the introduction of visa and labor reforms, according to the survey conducted by InterNations.
Many foreigners choose to invest in Dubai because they are confident that their funds will be safe here - the exchange rate of the dirham against the dollar has not changed since 1997. But another argument in favor of this condition is the opportunity not only to save, but also to invest and generate a profit. To do this, it's important to choose the right investment.
Is it profitable to invest in real estate in Dubai?
There are several options for investing in real estate. One of the most obvious options is to rent out your property and generate income. Potential investors should consider the following:
To benefit from the rent, you don't need to be permanently resident in the UAE or look for tenants yourself - the management company will do this for you. How quickly you can recoup your purchase will depend on a number of factors. For example, it depends on the location, the type of lease you choose, the characteristics of the project, the surface area, the layout, the condition of the accommodation, etc. For example, a highly profitable investment is guaranteed if the property is located in a sought-after neighborhood. The most popular apartment options are studios and one-bedroom units. Renting an apartment is generally easier than renting a villa.
There are options for both short-term and long-term rentals. In the first case, you rent a property for a short period of time (as a general rule, this format works successfully in areas popular with tourists, such as city centers or areas with beach access). In the second case, the contract is for a longer stay: in these conditions, the property may be located in an area less popular with travelers. For example, a potential tenant may choose your offer because he works in an office nearby, or because your property has easy access to one of Dubai's main roads.
Every residential or commercial space that can be rented has its own indicator - ROI (Return on Investment). This indicator shows how profitable the property unit you are about to buy can be or already is. This Return on Investment in Dubai is the final figure after all compulsory expenses have been deducted. The average return on investment in the emirate today is around 5-8%. However, depending on the type of property, the return on investment can vary. For example, a long-term lease may return 4-7% per annum, while a short-term lease may return 11-13%.
Another way to earn money on an investment is to resell it later. You can buy a property in an off-plan project. After that, you have the right either to transfer the property while it's under construction and benefit from a small price difference, or to wait until construction is complete and sell the finished home with a significant increase in value - up to 20%. In either case, the seller benefits, as every home becomes more expensive as construction nears completion. The sooner you buy a property, the higher your dividends.
How do you choose an apartment to invest in?
The most popular buy-to-let and buy-to-resale options are apartments. However, before investing in property, there are a number of aspects to consider. Investing in real estate in Dubai today can be very profitable if you take a number of steps before the transaction:
Find out more about the builder and make sure he's decent.
Evaluate projects that were completed by the development company earlier, to understand whether it is meeting its obligations on time.
. Decide which location interests you. For example, it could be a developed area with a complete infrastructure. If you're considering a purchase in new development areas, the potential of which is not entirely clear, it's best to contact specialists. Brokers will advise you on any issues and help you choose the right option for price and profitability.
. If you're talking about housing under construction, you can find a similar property in the same area and find out what its return on investment is and whether it's in high demand. Buildings at the VEFA stage have an important advantage: they can often be purchased on an interest-free installment plan from the developer.
. Calculate or discover the ROI of a residential unit already leased. This indicator is directly affected by location. The average profitability of apartments in popular neighborhoods today is as follows:
- Business Bay - 5.31%;
- Downtown Dubai - 5.42%;
- Dubai Marina - 6.11%;
- Jumeirah Village Circle - 6.21%
- Palm Jumeirah - 5.59%.
. Decide on the type and size of home you want to buy.
. Understand if you have enough money or if you need a bank loan.
. Decide whether you will be eligible for a resident visa when purchasing real estate. In Dubai, the minimum threshold to obtain a three-year residence permit is AED 750,000 (187,000 euros). The document can be issued for immediate family members and extended an unlimited number of times while you own the living space.
. Understand whether the purchase will be exclusively an investment stage, or whether you plan to live in the UAE for a certain part of the year. This decision can affect details such as finishes, views, layout, number of rooms, etc.
Dubai real estate agency NAYA PROPERTIES offers assistance at every stage of buying, selling and registering a property. The company's catalog includes all types of real estate for foreign investors, and many years of expert experience and in-depth knowledge of the local market will help you make the right choice.
