Dubai Property Guide
It’s a buyer’s market in Dubai as the real estate sector approaches the end of a major correction, with plenty of choice and great prices for homeowners and investors.
As one of the Middle East’s most stable and successful cities, Dubai is a vibrant hub for business, entertainment and leisure. Dubai is situated in the United Arab Emirates, which consistently ranks amongst the top ten countries preferred by expat workers , attracted by the luxurious lifestyle, high earning potential and tax-free income offered by the country.
In the past, investing in Dubai properties was a near-guaranteed way to grow wealth at an accelerated pace. Following the drop in oil prices in 2014, however, the real estate sector in Dubai has undergone a lengthy correction with significant decreases in buying and renting prices, for villas and apartments alike. According to data from property consultancy Cavendish Maxwell, the average apartment price in Dubai in January 2019 was AED 1.8 million, down from AED 2.1 million in September 2015. Meanwhile, the average villa price was AED 4.7 million, down from AED 5.6 million .
Experts and real estate developers expect the current trend to last until the end of 2020, and possibly early 2021. As a result, the best time for homeowners and medium-to-long term investors to switch their attention back to the property market in Dubai is now.
A challenge of oversupply
One of the key factors keeping prices low is the abundant oversupply of new properties that have come to market in recent years – with more houses expected to be delivered this year and in 2020. In 2018, an estimated 21,000 units came online; with 20,000 – 30,000 more expected this year.
Government initiatives to encourage property sales
In recent months, the UAE government has introduced several new initiatives to make home ownership more attractive to expat populations. Expats or foreign investors who invest AED 5 million in property can secure a five-year visa, and those who invest upwards of AED 10 million in the country (of which 40% can be in property) can secure a ten-year visa. Meanwhile, expats over the age of 55 who invest AED 2 million in property can secure a five-year retirement visa.
Real estate developers too are introducing innovative schemes to incentivize home ownership. For example, one developer offers a business trade license upon purchase of property in a specific community, and some developers are offering rent-to-own schemes that eliminate the need for a down payment.
The impact of Expo 2020 on real estate in Dubai
Many speculated that property prices would go up when Dubai won its bid to host the prominent business event Expo 2020, and to some degree this is true. When Dubai was announced as the winner in 2013, the market was immediately flooded with positive sentiment, leading to an increase in property prices for both residential sales and rentals, and the announcement of multiple new large-scale real estate projects. The property market in Dubai peaked shortly thereafter, in Q2 2014.
Schedule to take place from October 2020 to April 2021, Expo 2020 will create an estimated 250,000 new jobs and will attract an estimated 25 million visitors. As preparations for Expo 2020 take place, several opportunities have open up in real estate.
First, is the focus on affordable housing, to cater to the new recruits who are from the low-to-middle income strata. New affordable neighbourhoods have emerged in Dubai South (the site of Expo 2020), and existing affordable neighbourhoods such as Dubai Silicon Oasis and Jumeirah Village Circle have surged in popularity.
Second, is the expansion of the Dubai Metro. Upon completion in Q2 2020, the new lines will boost connectivity and provide easy access to affordable neighbourhoods like Dubai Investment Park.
A snapshot of prices in popular Dubai neighbourhoods
Prices vary significantly across different neighbourhoods in Dubai. According to Property Monitor , average sales price per square foot for villas in March 2019 range as follows:
• AED 2,363/sqft in the famous Palm Jumeirah • AED 1,031/sqft in popular villa community Arabian Ranches I • AED 798/sqft in affordable hub Dubai Silicon Oasis • AED 649/sqft in the upcoming affordable neighbourhood of Dubai South (site of Expo 2020)
Average sales price per square foot for apartments in March 2019 range as follows:
• AED 2,270/sqft in the new Al Habtoor City towers which overlook Dubai Water Canal • AED 2,101/sqft in Downtown Burj Khalifa, the world’s tallest building • AED 1,473/sqft in expat hotspot Dubai Marina which overlooks the marina and is popular for its nightlife • AED 1,043/sqft in expat hub Jumeirah Lakes Towers which is popular amongst singles and families alike • AED 741/sqft in affordable community of Jumeirah Village Circle • AED 689/sqft in affordable hub Dubai Silicon Oasis
Dubai’s apartment prices pale in comparison to global hubs, where the average price per square foot is much higher. Using data from Global Property Guide , Dubai’s average upmarket buying price is USD 550/sqft as compared to London’s USD 2,757/sqft, New York City’s USD 1,597/sqft, Mumbai’s USD 1,016/sqft and Toronto’s USD 990/sqft.
Things to know before you buy
Every market has different rules around purchase of property, and this applies to Dubai as well. For starters, expats and foreign investors can only purchase properties in free hold communities of which there are plenty in Dubai (all the communities mentioned above are free hold). Rules and fees vary for purchase of completed properties / transfer of properties and for off-plan properties, and for commercial and residential properties. For example, commercial properties are subject to a 5% VAT while residential properties are VAT-exempt.
For purchase of existing properties in Dubai, the following standard fees apply on top of the listed price:
- 2% fee to real estate agent / broker (unless buying directly from the developer)
- 4% transfer fee to Dubai Land Department authority (typically split between buyer and seller)
- approx. AED 4,000 fee for registration of property (for properties over AED 500,000 in value)
- approx. AED 500 fee for title deed
The process of buying property in Dubai has become increasingly streamlined and regulated in recent years as the market matures. From the hunt for the perfect property to the registration of your property and the on-going management of the property/tenants, an abundance of professional brokers and management services are at your service.