The Middle Eastern city of Dubai is known to be home to people from all over the world, who get attracted to its luxurious lifestyle. Dubai is also a preferred destination when it comes to real estate investments owing to the gorgeous skyscrapers, unlimited retail and dining options, low crime rate, excellent transportation routes, favorable return on investments that the city has on offer. Over the last two decades, Dubai has emerged as one of the most popular destinations for real estate investment. But as with any market, there are ups and downs. So, is it worth investing in the Dubai real estate market? We have listed out the advantages and drawbacks of buying real estate in Dubai for your ease.
Benefits of Purchasing Property in Dubai
Choosing the best place to buy property in Dubai depends on your priorities, the size of your family, budgetary concerns; and if you are an investor, your financial goals. Fortunately, the range of affordable, futuristic, and uniquely designed residential communities make the city a haven for property investors.
Constant Development & Innovation
Would you rather buy property in a city where there is no more development work going on or in a city where new innovative ideas are launched every now and then? Dubai is already well on its way to becoming the smartest city in the world. There is always something new about Dubai and that is one of the biggest benefits of buying a property in Dubai as well.
Dubai is already home to the tallest building aka Burj Khalifa and now there is going to be another tower taller than the Burj as well. The innovative ideas presented and initiated by the Dubai government are a healthy sign that buying a property in Dubai could be the best decision of your life. With all the development happening at a rapid pace, there will be new shopping centers opening near your property, new roads linking to the community hence increasing the value of your Dubai property over the period of time.
Buying a property worth AED 1 million in Dubai will make you eligible for an investor visa. However, you will need to make sure that the property that you are buying is not under a mortgage or off-plan. Upon submitting a copy of your passport and the title deed to the Dubai Economic Department, the department will issue a trade license on that property after getting the approval from the Dubai Land Department. You can then go to the Immigration Department to obtain the 2-year residency visa.
If you invest in a property greater than AED 5 million, you will be eligible for a 5-year renewable visa. Renewal of the above-mentioned visas will only be possible as long as you maintain ownership of your property. Investing in a property worth AED 10 million will entitle you to have a 10-year Dubai visa. In this case, the property must remain unsold at least for 3 years.
Stable Economy and Political Situation
Amidst all the unrest in the Middle East, Dubai is an oasis of stability. As a result, the economy has been steadily growing, owing to the success of for example real estate, tourism, and manufacturing. The country’s economy is one of the most overlooked factors when making a property investment. New investors most especially ex-pats are attracted to invest in merely low-priced properties thinking they can get a run for their money. However, the reality is that investing in any property is investing in the country’s economy.
The United Arab Emirates (UAE) has gone through various economic hurdles over the past decades and has remained stable and robust since then. Abu Dhabi may have suffered the blow of the oil crises, but Dubai emerged to stay strong economically in the whole MENA region. Therefore, buying a property in Dubai is a good investment choice as its market is resilient enough the withstand economic challenges.
Security & Safety
Crime is one of the things almost unheard of in the emirate, making it one of the benefits of buying a property in Dubai. Ideal property investment requires a safe community where parents can allow their children to play freely and where they can sleep soundly at night without worrying about thieves in the night. While other countries have been trying to resolve their increasing crime rates, Dubai has been one of the consistent areas in the MENA Region when it comes to security and safety.
Aside from being equipped with the latest gadgets that can bust any criminal, Dubai has strict and stern policies against any crime. Robbery cases are close to none and even petty road fights are resolved peacefully in the city. Being able to walk at peace alone in the night is one of the priceless benefits of buying a property in Dubai.
Good Return on Investment
Dubai’s real estate market is a mature one, thanks to its increasing population. Therefore, if you are someone who spends a hefty amount on rent every year, it is advisable that you rather consider buying a property of your own as it will benefit you from a good return on investment if you ever wish to sell it off. Also, Dubai offers a minimum rental yield of 5%, which is higher than many other major cities in the world. Therefore, you can also consider renting out your property so as to earn a good amount out of it.
No Property Tax
Can you guess how much is property tax in Dubai? There is no property tax in Dubai. This means, once you have bought the property, paid the registration fee to Dubai Land Department, there is no other government tax to be paid against your property at all.
You will profit if you buy a property in Dubai as you will not have to spend money on annual property taxes, which you would otherwise need to do in cities like Hong Kong, New York, and London. Once you have purchased the property in Dubai and have paid the registration fees, there is no additional and ongoing tax that you will need to pay.
Drawbacks of Buying Real Estate in Dubai
While there are definite perks to investing in the Dubai property market, it is also important to consider the general drawbacks of buying a property in Dubai before jumping into any investment. On that note, here are some disadvantages of purchasing real estate in Dubai
Oversupply of New Developments
The real estate boom in Dubai has caused a massive increase in new developments. As a result, the supply of new developments exceeds demand. The saturated market resulted in a 30% price decrease over the last 5 years.
Initial Purchase and Additional Costs
One of the things to consider when it comes to buying a property in Dubai is the initial costs that come with the purchase. For example, those who purchase property directly from a developer will need to pay mandatory fees to the Dubai Land Department (DLD). This includes the DLD fee which is 4% of the property value, the fee for issuing the Title Deed, and the administration fee — all of which need to be paid upfront.
Buyers who go for mortgages will have to pay a Mortgage Registration Fee to the DLD which is 0.25% of the mortgage value in addition to an admin fee. However, the news is good for investors who plan on making investments with full cash payments as the Mortgage Registration Fee won’t apply to them.
No Possibility of Becoming A UAE Citizen
When you are thinking of buying an apartment or villa for your retirement, you should keep in mind that a long-term residence permit is the best you can get. This means that when your permit is not extended, for whatever reason, you will have to leave the country.
Is It Worth Buying Property in Dubai?
Anyone will agree that real estate development in Dubai takes place in a volatile market with an unpredictable future while you cannot do anything to change the laws and rules of the game. However, the high rental yields and the rapid development of the city will always keep the interest of investors and home buyers. Drawbacks aside, the Dubai real estate market offers a slew of beneficial investment opportunities for those thinking of buying a property in Dubai.
So, whether you are a professional investor in property or investing for the first time, the assistance of a reliable real estate agent can be essential for you. Riz and Mona Consultancy is a renowned consultancy firm in Dubai that has helped many investors for a beneficial investment. You can blindly trust our real estate agents and advisors, and make the best investment of your life.