It is known that the Middle Eastern city of Dubai is home to people from all over the world who are drawn to its lavish lifestyle. Because of the beautiful skyscrapers, endless shopping and dining opportunities, low crime rate, excellent transport paths, favourable return on investments that the city has on offer, Dubai is also a favoured destination when it comes to real estate investment.
Dubai has emerged as one of the most successful real estate investment destinations over the last two decades. But there are ups and downs like there are in every sector. So, is the Dubai real estate sector worth investing in? For your convenience, we have summarized the benefits and disadvantages of purchasing real estate in Dubai.
Benefits of Purchasing Property in Dubai
Choosing the right place to purchase property in Dubai depends on your preferences, family size, budgetary considerations, and your financial targets if you are an investor. Fortunately, the variety of residential communities that are sustainable, futuristic and creatively built render the city a sanctuary for investors in property.
Constant Development & Innovation
Do you prefer to purchase land in a city where there is no more development work going on or in a city where every now and then fresh creative projects are launched? Dubai is now well on its way towards being the world’s smartest city. There is always something novel in Dubai and it is also one of the main advantages of purchasing a property in Dubai.
The tallest structure, aka Burj Khalifa, is already home to Dubai and now there will be another tower taller than the Burj as well. The revolutionary innovations proposed and introduced by the government of Dubai are a sure indication that it might be the best choice of your life to purchase property in Dubai. There will be new shopping centres opening near your property, new roads connecting to the community, thus increasing the value of your Dubai property over time, with all the development happening at a rapid pace.
You will be eligible for an investor visa by purchasing a property worth AED 1 million in Dubai. You may need to guarantee, though, that the property you are acquiring is not under a mortgage or off-plan. Upon submission to the Dubai Economic Department of a copy of your passport and title deed, after receiving permission from the Dubai Land Department, the department will grant a trade license for that domain. You will then head to the Department of Immigration to request a two-year residence visa.
You would be eligible for a 5-year renewable visa if you invest in the property above AED 5 million. It would only be possible to renew the above-mentioned visas as long as you retain possession of your house. You would be entitled to a 10-year Dubai visa if you invest in an estate worth AED 10 million. In this scenario, the property must be kept unsold for a period of 3 years.
Stable Economy and Political Situation
Dubai is an oasis of peace amidst all the chaos in the Middle East. As a consequence, the economy has expanded rapidly, owing to the growth of real estate, tourism, and manufacturing, for example. One of the most underestimated considerations when making a property purchase is the economy of the country. New investors, especially ex-pats, are drawn to invest in only low-priced assets, believing that they can get a run for their cash. The truth is, however, that investing in every property is investing in the economy of the country.
Over the past decades, the United Arab Emirates (UAE) has passed through numerous economic challenges and has since stayed prosperous and resilient. Abu Dhabi may have suffered the blow of the oil crisis, but in the entire MENA region, Dubai has emerged to remain economically powerful. Buying property in Dubai is also a strong investment option since its economy is sufficiently robust to cope with economic challenges.
Security & Safety
One of the aspects that is almost unheard of in the Emirate is crime, rendering it one of the advantages of purchasing a property in Dubai. A healthy environment where parents can encourage their kids to play safely and where they can sleep soundly at night without thinking about robbers in the night demands an ideal property investment. While other countries have sought to overcome their rising crime rates, when it comes to stability and security, Dubai has become one of the most consistent places in the MENA zone.
Dubai has stringent and stern strategies against any violence, apart from being packed with the new gadgets that can bust any suspect. There are almost no incidents of theft and even minor road battles in the city are settled peacefully. One of the priceless advantages of purchasing a property in Dubai is being able to stroll in peace alone at night.
Good Return on Investment
Thanks to its growing population, Dubai’s real estate sector is a mature one. Therefore, if you are somebody who pays a heavy sum on rent per year, it is recommended that you consider owning your own property instead, and if you do intend to sell it off, it would profit you from a decent return on investment. Dubai also has a 5 percent minimum rental yield, which is greater than many other big cities in the world. Therefore, to make a decent sum out of it, you may even consider renting out your house.
No Property Tax
Can you estimate how high the Dubai property tax is? In Dubai, there is no property tax. That implies that, after you have purchased the property and charged the registration fee to the Department of Land of Dubai, there is no other government tax payable on your property.
If you purchase a house in Dubai, you would benefit because you would not have to pay money on regular property taxes, as you will otherwise have to do in cities such as Hong Kong, New York and London. There is no extra and continuing tax that you would need to pay after you have bought the property in Dubai and charged the registration fees.
Drawbacks of Buying Real Estate in Dubai
Although investing in the Dubai property market has serious benefits, it is also necessary to recognize the general disadvantages of buying a property in Dubai before jumping into any investment. On that note, there are several drawbacks to buying real estate in Dubai.
Oversupply of New Developments
A huge spike in new developments has been induced by the real estate boom in Dubai. Consequently, the market exceeds the availability of new developments. For the past 5 years, the crowded sector has culminated in a 30 percent price drop.
Initial Purchase and Additional Costs
The initial costs that come with the purchase are one of the factors to remember when it comes to purchasing a property in Dubai. For starters, the Dubai Land Department would need to pay mandatory payments to anyone who buy property directly from a developer (DLD). This entails the DLD charge, which is 4 percent of the valuation of the land, the Title Deed issuance fee and the administration fee, both of which must be charged in advance.
In addition to an admin charge, borrowers going for mortgages would have to pay a mortgage registration fee to the DLD that is 0.25 percent of the mortgage amount. However, since the Mortgage Registration Charge would not extend to them, the news is positive for borrowers who intend to create deposits in maximum cash payments.
No Possibility of Becoming A UAE Citizen
You should bear in mind that a long-term residency permit is the best you can get while you are thinking about renting an apartment or villa for your retirement. This implies that when your visa is not renewed, you may have to leave the country for whatever reason.
Is It Worth Buying Property in Dubai?
Everyone would agree that in a competitive market with an uncertain future, real estate growth in Dubai takes place while you cannot do much to alter the laws and rules of the game. However, the interest of developers and home buyers would still be held by the high rental yields and the rapid growth of the city. Drawbacks aside, for those dreaming of purchasing a property in Dubai, the Dubai real estate industry has a variety of valuable investment opportunities.
Therefore, if you are a seasoned investor in real estate or buying for the first time, the support of a reputable real estate agent will be important to you. Riz and Mona Consultancy is a respected Dubai advisory company that has aided numerous clients in making a positive investment. You can trust our real estate agents and experts blindly and make the best investment of your life.