Few property markets in the world can claim to offer similar rental yields or capital gains as Dubai – and considering its strategic geographical location, sophisticated infrastructure and cosmopolitan lifestyle, it’s no surprise the city is a magnet for property investors.
Dubai real estate assets generated a 120 per cent return for investors in rents and capital gains over the 10 years since the Global Financial Crisis, according to a new report by Reidin/Global Capital Partners. In contrast, such assets generated a 75 per cent return in London and 63 per cent in New York. The bulk of the returns in Dubai were achieved through rental increases, the report said.
“Dubai offers attractive rental yields of between 10 per cent and 12 per cent,” said Niraj Masand, Co-Founder and Director of boutique real estate firm Banke International. “The average property price is also good, ranging from Dhs1300 ($354) to 1500 ($409) per square foot.”
On the other hand, Capital Appreciation ranges from 20 per cent to 30 per cent annually for apartments and over 15 per cent for villas, according to PNC Menon, chairman and founder of Indian multinational real estate developer Sobha Group.
Where to buy?
While all master-planned developments in the city have their own unique value propositions, some of the best places to invest are Downtown Dubai, Dubai Marina, Arabian Ranches, Dubai Creek Harbour and Dubai Hills Estate, says Lejla Celebic, marketing manager at Hamptons International, a Dubai-based real estate agency.
“These communities, developed by Emaar, come with strong industry credentials given the track-record of Emaar in delivery, and the various features that make them appeal to investors.”
Indeed, the Dubai Land Department (DLD) reported that in 2016, Business Bay emerged as the most attractive area for property investors, with 3,491 transactions valued at Dhs5.1 billion ($1.4bn) or above, followed by Dubai Marina with 2,923 transactions exceeding Dhs6 billion ($1.6bn). Jebel Ali 1, Burj Khalifa and Warsan 1 were the next most active areas for unit sales.
A new property that has gained strong investor interest from Dubai and international markets is The Address Residences Jumeirah Resort and Spa. Celebic highlighted this was a rare investment opportunity as it is the last available plot to ever be built on the beach on Jumeirah Beach Walk.
Secondary areas in Dubai have also maintained solid transactional levels thanks to the high returns they have delivered. In 2016, Silicon Oasis offered a rental yield of around 11 per cent, Sports City 10 per cent, Motor City 9 per cent, and Jumeirah Village Circle 9 per cent.
Confidence in Dubai’s property market is primarily owed to the introduction of regulations and strict enforcement of industry practices by the Real Estate Regulatory Agency (RERA), enabling the sector to reach a new level of maturity.
In addition, the UAE’s solid financial and legal framework that governs the business industry has immensely contributed to the inflow of investors from all over the world.
This explains why 41,776 property sales transactions took place in 2016, representing a value of Dhs103 billion (US$28bn) based on DLD data. Another 15,000 new mortgages were created, totalling Dhs128 billion (US$34.8bn).
Another consideration must be the long-term impact of Expo 2020, the first World Fair to be held in the Middle East, Africa and South Asia region, which is expected to be a significant driver of job creation.
“Dubai is one of the easiest places to invest in real estate. You are not required to hold any type of residency permit to buy a property,” Niraj Masand added. He advises first-time investors to visit Dubai to explore their options, identify the objective of their investment and decide on their preferred property type.
“If it’s a ready property, view as many units you can. If it’s off-plan, check out other completed projects by that developer. Start searching online, contact a RERA-approved agent and determine the overall cost of the property, including deposit, transfer, registration and agent fees, as well as the potential for currency exchange rates to fluctuate.”