Thinking about buying an investment property in Dubai? We don’t blame you. Investing in property can be a great way to build wealth and generate income. And Dubai real estate offers some of the most attractive rental yields in the world. Yet there are many sides to consider before leaping into Dubai’s real estate market to ensure you get the best possible returns.
Should I invest in Dubai?
Growing city. The population of Dubai in 2000 was just 862,000. Fast-forward to today, and the population is approximately 3.4 million. That’s enormous growth! This growth makes it one of the fastest growing cities in the world, which means it’s there for the foreseeable future, there will always be high demand for new real estate.
High rental yields. Properties in Dubai provide an average yield of between 5-9%. That’s significantly higher than many other mature real estate markets, such as London (2.7%), New York (2.9%), or Hong Kong (2.4%).
Favourable tax conditions. Specifically, there is no property tax or stamp duty to pay on properties in Dubai which are typical in other countries, making Dubai a hugely attractive investment opportunity for buyers. However there is a 4% transfer fee to be paid to the Dubai Land Department which you should keep in mind.
What to consider when selecting an investment property
If you are considering investing in property in Dubai, then a strong return on investment (ROI) is the main goal. Some of the main factors to consider that can influence your ROI are the following:
Location
Size
Quality
Market conditions
Interest rates
Maintenance costs (RERA Service Charge and Maintenance Index)
Facilities available in the community
Proximity to transport, education, etc.
Tips for achieving a strong ROI on your investment
Apartments provide stronger rental yields. Apartments are considered better than townhouses or villas because of Dubai’s large low-to-mid income population who are looking for more affordable homes.
Go for smaller apartments in affordable communities. Make sure these properties are close to essential transport and amenities.
Resale of smaller properties is faster. They also offer better value because these types of properties cater for Dubai’s significant expat population.
Are there any downsides to investing in Dubai?
Down payments. The minimum deposit you will need is 15% for UAE nationals and 20% for UAE non-nationals.
Upfront costs. Additional transaction costs are usually estimated at 7% of the purchase price.
Maintenance fees. Annual charges payable to the property developer can impact your overall ROI. Apartments typically have higher service charges per square foot compared to villas due to higher maintenance costs for communal areas.
Ready to invest in a Dubai property?
High rental yields in one of the fastest growing and ever-expanding cities in the world means that Dubai is certainly an attractive prospect for investors and home buyers. But as with everything in life, there can be downsides! So make sure to weigh up your options, and if you decide to leap into Dubai real estate, then take into consideration things like location and how to get the best ROI from your investment.