Investing in real estate in Dubai is an excellent way to build wealth and generate income.
The city offers a multitude of advantages to foreign investors, especially in terms of taxation and administration.
Find out why it’s worth investing in Dubai, as well as several tips to help you get a better rental return.
Why Invest in Dubai?
Dubai is one of the world’s fastest-growing cities in recent years. The oil industry and investments in luxury tourism have made Dubai an attractive destination.
The dynamic economy of the emirate and the facilities for foreign investment are encouraging more and more people to invest their money there.
What are the main advantages of investing in Dubai?
Dubai is a particularly interesting city to invest your money in. Entrepreneurs wishing to open a company there and investors in the real estate sector enjoy many advantages.
1. A dynamic real estate market with a high rental yield
Dubai’s real estate market is very dynamic thanks to the constant creation of new real estate projects.
This translates into an abundance of offers for various properties (apartments, offices, villas, etc.).
The difficulties related to the lack of property, generally frequent in most large Western cities, are greatly reduced in Dubai.
Buying an apartment or a villa in Dubai is the assurance of obtaining higher rental yields than those offered in the West.
Here is a table showing the average gross rental yield for several major cities compared to Dubai:
|City||Average gross rental yield|
|Hong Kong||2,82 %|
Also, note that real estate prices per square meter are generally lower than in many other cities around the world. Despite its reputation as a luxurious city, Dubai offers high-quality real estate at very affordable prices.
Here is a table comparing the average price per square meter for buying a downtown home in several major cities to that of Dubai:
|City||Average price for a downtown apartment|
|Dubai||3 000 €/m²|
|London||14 900 €/m²|
|Paris||12 300 €/m²|
|Marseille||4 500 €/m²|
|Hong Kong||22 000 €/m²|
|Brussels||3 800 €/m²|
2. A very advantageous tax system
Dubai’s tax system is very interesting for entrepreneurs wishing to open a business, since no tax is currently levied on company profits.
However, a corporate tax is planned to be introduced from June 2023. This will take the form of a 9% tax on profits.
Note that companies headquartered in a UAE free zone will not be affected by the new tax.
Investors in the real estate sector also enjoy tax benefits. Property owners do not pay property tax or rental tax in Dubai. In other words, 100% of the rental income goes directly into the owners’ pockets.
The only real estate-related tax is a property transfer tax equal to 4% of the purchase price of the property.
3. Simplified administrative procedures
The paperwork involved in opening a company or buying a property in Dubai is quick and easy.
Foreigners only need to have a valid passport in order to purchase freehold property in the emirate.
What are the disadvantages of investing in Dubai?
The major disadvantage of investing in Dubai real estate is one of its main assets: the large supply of housing.
Many real estate projects have the advantage of offering a wide choice of properties for purchase, but the supply tends to exceed the demand.
This situation can be detrimental to landlords who are unable to find a tenant.
It is therefore important to invest wisely and choose properties that rent quickly and in the most sought-after neighborhoods.
How to Invest in Real Estate in Dubai?
In order to invest in real estate in Dubai, it is essential to take into account these three elements:
- The accompaniment by a professional
- The type of property
- The location of the property.
Invest in Dubai real estate with a local real estate agent
It is highly recommended to contact a local real estate agent to invest in real estate in Dubai.
Working with a local real estate professional will save you valuable time and provide you with sound advice. It also prevents you from making a bad investment.
In practice, the agent will search for properties that meet all your criteria. He or she will then send you a shortlist of properties that you can visit during your stay in the area.
If you wish to purchase an apartment or a villa following a visit, the real estate agent will accompany you through all the administrative procedures (signing of the sales agreement, verification of legal documents, transfer of ownership, etc.).
Real estate investment in Dubai: choosing the right type of property
Smaller properties offer higher gross rental yields. These properties are also more popular and are much easier to rent. Conversely, villas and large apartments suffer from a much higher vacancy rate.
It is therefore recommended to invest in studios or one-bedroom apartments in order to minimize vacancies and increase returns.
Choosing the right neighborhood before investing in Real Estate in Dubai
In order to get the best return on investment, you need to purchase an apartment in an affordable neighborhood with modern health care, education and transportation facilities.
Here is a table showing the main neighborhoods in Dubai and the advantages and disadvantages of each for investing in real estate:
|Dubai Sports City||– Attractive gross yield (7.5%)|
– Close to downtown
– Numerous sports facilities
|– Lack of options to buy|
|Dubai Marina||– High rental demand|
– Pleasant and modern neighborhood
– Affordable sales prices for small areas
|– High sales prices for large stores|
|Palm Jumeirah||– Privileged residential area for expatriates|
– Exceptional location
– High rental demand
– Very good gross yield
– Safe investment thanks to constant price growth
|– High selling prices for any type of property (200 000 € minimum for a studio)|
|Business Bay||– Dubai’s business district|
– High rental demand
– Many new real estate projects
– Small affordable areas (130 000 € for a studio)
|– Lack of options to buy|
Dubai is a destination that offers many advantages for investors in the real estate sector and entrepreneurs wishing to create their business.
However, one must be careful and take into account the particularities of the local economy and the legislation in force, especially when opening a company in Dubai.