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Investing in luxury residential real estate in Dubai

Investing in luxury residential real estate in Dubai

The Dubai real estate market is one of the key sectors in the Emirate's economy, and luxury real estate is one of the main parts of the cultural image of the city in the public view.

Luxury real estate has many attractive features for investment, however, as with any investment, the premium sector of the market should be carefully studied from different points of view, taking into account the many factors that shape it.

Only if you have a sufficient understanding of the situation, you can confidently start investing large funds in attractive real estate.

We will try to give a complete picture of what is offered in this real estate sector in Dubai, and explain why the elite real estate of the Emirate is one of the best investment destinations among the rest of the world leaders.

The content of the article:

One of the world market leaders

Premium real estate in Dubai attracts more and more foreign investors from all over the world every year. They are attracted by favorable tax regimes, a variety of visas for large investors, convenience and simplified rules for buying real estate, high income, greater security of deposits.

The Dubai real estate market is already quite mature, since 2002 it has been actively developing and doing this under the careful supervision of both the state and key real estate developers. Nevertheless, compared to other world market leaders, the Emirate is a fairly young and modern market, which gives it its advantages.

The first advantage is accessibility.

Availability of luxury housing

Despite the fact that the "luxury" lifestyle is practically the brand of the Emirate, housing, amenities and benefits for residents, including foreigners, are one of the lowest among the leaders of the world market.

The difference is especially strong when comparing the city with such giants of the premium sector as Singapore, New York and London.

According to the analytical agency Knight Frank, as well as some others, in 2020, prices for premium-class housing reached historical lows. Even when the leaders of the KF rating showed an increase in prices in their sectors at the beginning of 2021, Dubai continued a steady downward trend. And this trend has been forming for years.

Only in the middle of 2021, the paradigm of price movement changed to the opposite, and the sector began to show growth.

At the moment, an attractive situation is being formed for investors, when the price growth is at a low start and there is an opportunity to buy a sufficient amount of property to increase their own income in the coming years.

To give a specific idea of the cheapness of expensive housing in Dubai — for $1 million in the city, you can buy five times more living space than in London.

At the moment, more than 40,000 different residential properties are traded in the Emirate at the million dollar mark, which is second only to such major players as New York.

Monaco, Hong Kong, Singapore and Geneva are also much more expensive than Dubai real estate.

In other words, at the moment, Dubai compares favorably with its competitors both with low prices and high growth potential due to the low start effect.

Dubai is also home to some of the world's largest developers of the premium sector. Do not be afraid that low prices signal low quality. This situation is not due to the quality of real estate, but because of its quantity, which often exceeds the physically possible demand from buyers.

At the same time, a huge number of projects in the Emirate are housing, which in many senses is more art than just living space at a high price.

One of the leading and most famous developers of the city is Emaar Properties. The latter has such elite projects as a cluster of Arabian Ranches villas and a coastal microdistrict built from scratch — Emaar Beachfront.

Emaar, like many other companies, such as DAMAC or Select Group, often offer luxury apartments or villas that easily surpass the best offers in Singapore and London in quality.

In principle, any questions to the competence of Dubai developers are removed by the fact that such objects of architectural and engineering art as the Palm Jumeirah and the Burj Khalifa are located in the city.

And again, we must repeat that this is available to a wide range of investors and expats. In Dubai, the cost of home maintenance, social, medical and educational services, entertainment and retail is 20-40% cheaper than in the already mentioned markets of both the West and Asia.

No obstacles for investors

Another distinctive feature of the Dubai market is the maximally simplified regulations, requirements and procedures for buying a home, even for foreigners who have never been residents of the UAE.

In addition, the Emirate is not only a well-known tourist center and real estate market. The city is also highly commercialized and economically diversified. Last but not least, this is achieved by the fact that the Dubai authorities have done everything to minimize the difficulties when opening a business on their own territory. At the same time, we are talking about both offshore and "onshore" companies.

Investors can be content with a tax system that is free from disputes about personal income, property and land taxes. In addition, owning real estate through a company gives a large share of anonymity, since only the ownership of real estate on the part of the company is registered, and not who exactly uses the housing at the moment.

In Dubai, it is easy to get a mortgage that will cover up to 80% of the costs of buying luxury real estate. At the same time, if you are going to make money on the acquired assets, you can be content with one of the highest ROI in the world  (return on investment) at the level of 8-15%.

Convenient geographical location

Dubai is located on the coast of the Persian Gulf and is one of the key transport hubs of the Middle East, conveniently connecting east and west.

A convenient time zone, developed transport infrastructure and the ability to quickly reach key cities in Asia, Europe and the Middle East make the city convenient for both business and remote work, as well as for tourists and travelers.

Economic indicators of the sector

As we have already indicated, the luxury real estate market in Dubai, on the one hand, is in a low price range due to the imbalance of supply and demand that has existed in recent years, on the other hand, it has begun to enter the opposite trend of price growth, which makes this year ideal for investors.

You may have time to buy cheap housing, but in the next couple of years you will earn on its intensive growth.

We can learn about the growth from the following data:

At the moment, the emirate's market has grown by more than 45% compared to 2020, which has somewhat undermined the traditional tourist economy of the Emirates.

According to DLD (Dubai Land Administration Department), of $5.9 billion earned by the real estate sector by May 2021, the residential real estate sector brought in $2.9 billion. The purchase through mortgage registration brought $1.76 billion, another $1.1 billion was received from direct subsidies to the sector.

A total of 6,021 transactions were made in May, of which 5,359 were purchase and sale transactions. 11,387 new investors entered the market, which accounted for 66% of the total inflow of investors in the first five months of 2021.

S&P Global has published a positive forecast, counting on revenue growth in the sector by more than 30% by the end of this year. The agency's analysts expect the emirate's GDP to grow by 3.5% in 2021 and 2.5% in 2022.

At the same time, a large analytical agency Property Monitor reports that over the past seven months, the Dubai market has seen a gradual increase in prices by 10% compared to a drop in 2020.

According to Knight Frank, the total volume of real estate sales on the market over the past four years has reached a record $3.02 billion.

Recovery of the luxury real estate market

At the end of June 2021, 42,000 luxury housing objects worth $1 million were presented in Dubai.

By July of this year, buyers have already bought 22 luxury residential properties with a total cost of $770 million. In 2020, only 19 objects were purchased.

The trend of buying real estate in Dubai from $10 million may signal a global shift in the residential sector towards growth, given that the Emirate shows the best results since 2015.

The market leader is the villas in Palm Jumeirah.

Faisal Durrani, head of Middle East research at Knight Frank, believes that the growth in the luxury real estate sector is due to the success of the government in the fight against COVID-19 and the easing of quarantine restrictions, which have led to a record influx of wealthy investors into the market since January 2021.

If in April-May of this year a restrained fall in prices was still expected from the sector, by the beginning of July a small but stable growth trend became obvious, which will continue over the next year or two.

A wide offer of real estate

One of the main features that are attractive to investors is the size and variety of premium real estate offered: villas, townhouses, penthouses, apartments with five or more rooms.

Dubai developers annually bring to the market more than 60,000 new housing projects, a large share of which are expensive objects in the luxurious areas of Palm Jumeirah, Dubai Marina, Emirates Hills, Downtown Dubai and many others.

In general, the residential property market in Dubai can be divided into two mentioned categories of housing:

  • The first is apartments and penthouses.
  • The second is villas and townhouses.

Popular areas of Dubai with luxury apartments:

  • Dubai Marina: ROI — 5.50%; Price per sq. m. — $3,310.
  • Downtown Dubai: ROI — 4.57%; Price per sq. m. — $5,145.
  • Business Bay: ROI — 5.35%; Price per sq. m. — $3,408.
  • Palm Jumeirah: ROI — 4.47%; Price per sq. m — $4,581.
  • JBR: ROI — 3.81%; Price per sq. m. — $4,347.

Dubai Marina continues to attract the greatest interest from buyers and investors due to high-quality real estate, convenient location on the coast and proximity to tourist attractions.

The average price per square meter of apartments in Dubai Marina increased by 5.62%.

In other popular communities, such as Downtown Dubai, Business Bay and Palm Jumeirah, there is an increase in the price of a square meter by 5-8%.

Popular areas of Dubai with luxury villas:

  • Arabian Ranches: ROI — 5.20 %; Price per sq. m. — $2,779.
  • Dubai Hills Estate: ROI — 4.88 %; Price per sq. m — $3,179.
  • The Villa: ROI — 4.65 %; Price per sq. m — $1,949.
  • Palm Jumeirah: ROI — 4.22%; Price per sq. m — $6,672.
  • Jumeirah Golf Estate: ROI — 4.73%; Price per sq. m — $3,158.

Arabian Ranches are still the favorites among buyers of luxury villas. The price per square meter in some cases increased to 8.9%. The cost of buying four-bedroom villas increased by 8.3%, five-bedroom villas increased by 6.7%.

In Dubai Hills Estate, the growth in the cost of a square meter was 7%, four-bedroom villas also increased by 7%. In other popular clusters of villas, prices increased by 7-10%.

Инвестирование в элитную жилую недвижимость Дубая

Conclusion

As a result, the following can be said about luxury real estate in Dubai: the market has been getting cheaper for a long time, which made it profitable for personal use, for example, for expats. But in the middle of this year, there was a trend crisis in the sector, and now investors should be interested in buying premium real estate in order to catch the growth trend at its very beginning.

The market as a whole creates minimal obstacles for investors and starting a business, it is favorably located geographically to attract a large number of people who create high demand.

Leading positions in the world market and a wide offer of real estate of different sizes and configurations allow any investor to choose a property that exactly matches his personal preferences or earnings plans.

If you are interested in buying luxury real estate in Dubai, we offer you the services of selection and support when buying real estate in the most luxurious areas of the Emirates. Our company offers real estate valuation services, legal advice, market analysis — we are ready to advise you on any questions.

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