Real estate is one of Dubai’s most important commodities; in 2019, real estate accounted for 13.6% of the Emirate’s GDP. The epitome of Middle Eastern intrigue, investors and expats alike are drawn to Dubai for myriad of reasons such as the country’s stability, laidback lifestyle and high quality of life.
But, although 80% of Dubai’s population consists of expats, many shy away from buying property, either due to the high initial costs, lack of job security, or uncertainty over the length of residency.
Renting an apartment does not have these caveats; renting offers simpler contracts and does not require much commitment (most rental contracts are for a period a year). But on the other hand, renting is very expensive.
So is buying property a better idea?
Should you buy or rent? How do you even buy a house in Dubai?
Do not worry because we have you covered. Read on for the ultimate guide buying a property in Dubai and everything else you need to know about!
Buying Property in Dubai as a Foreigner
If you are looking to buy property in Dubai, you will be glad to know that the process is much simpler than most other countries.
However, there is one detail you need to be aware of. Foreigners can buy a property in Dubai only if it is in specific freehold areas. This law isn’t enforced just on expats in the Emirate but also on foreigners who do not possess a residency visa of any sort.
So what are these neighborhoods?
For apartments, Dubai Marina, Downtown Dubai, Jumeriah Village Circle, Jumeirah Lake Towers, Palm Jumeirah, and Business Bay are quite popular. Right now, a property in Dubai Marina is especially sought after thanks to its accessibility to public transport and leisure activities, eye-catching views and its nearby beach.
Looking for villas? Palm Jumeirah, Arabian Ranches, Dubailand and The Springs are the go-to neighborhoods for the best villas in town.
So the most important question. How to buy a property in Dubai? That brings us to…
…The Process of Buying a House
The recent dip in property prices makes this a great time to purchase property in Dubai, especially since Dubai property prices trends indicate that Dubai property prices after Expo 2020 will go on the rise.
Anyway back to the topic!
Thanks to the many property sites, finding an apartment within your budget is an easy task.
What do you do once you find the right property?
Once you find an apartment or villa that catches your eye, pay the real estate company two percent of the property’s value to book the property and for their service and assistance.
Protip; Get receipts for every transaction and do your due diligence on the real estate company beforehand.
In addition to that, you will have to pay the Dubai Land Department four percent of the property’s fee, although this is evenly split with the seller.
Protip; Some developers and real estate agents might tell you the entire four percent fee must be paid from your side or that they will pay two percent as a promotional offer. Do not fall for it! They are legally obliged to pay half.
On the day of the transfer, bring Dh 250 to pay for the transaction fee before you can receive the title deed.
Now to the final step! (wait… there is more??)
Finalize the registration of the property to your name by paying Dh 4,000 – if the value of the property is Dh 500,000 or more. If it’s more than Dh 500,000, the payment is halved to Dh 2,000. This transaction is done after the money is transferred from the buyer to the seller.
In the event that you have put up a mortgage on the property, you must pay a mortgage registration fee to the Dubai Land Department which is 0.25 percent of the loan.
P.S; Do keep in mind there are many other fees like your Dubai insurance for the house, furniture, utility connections, and more.
Buying vs Renting
Regardless of where you live in Dubai or the lifestyle you live, I think we can all agree that our rent swallows up a major slice of our salaries. According to experts, on average, forty percent of a Dubai expat’s income goes for the rent!
Renting a one bedroom apartment will set you back Dh 50K to Dh 90K a year, depending on the neighborhood.
So is there a point in buying a property?
Well, the answer to that question depends on how long you plan to stay in Dubai.
Do you plan to live in Dubai for at least fifteen years? If that’s a yes, it makes more sense to buy a home in Dubai.
On the other hand, if you plan on staying for about twelve years or less, it might be a better option to rent instead of trying to buy a house in Dubai.
Let’s take a look at the numbers. For our example, we will look at a house in Dubai for sale at Dh 1.3 million and costs Dh 65K per year to rent.
If you are looking at the house in Dubai to buy, the initial expenses (down payment, fees, furnishing, broker fees, registration fees etc.) add up to Dh 467,040.
On the other hand, it will cost just Dh 23,666 if you rent an apartment. This is almost twenty times less than purchasing a property, but the latter’s value is mostly driven by the down payment, which is basically the initial equity for the asset, in this case your property.
How do the figures look twenty years down the line? We are following the assumption that the rent will increase by 15% every ten years and that the mortgage payment stays constant, as is generally the case.
If you purchased the property, at the end of twenty years you will have paid Dh 300K for service charges and Dh 1.3 million towards the mortgage, but the property is your own.
If you had rented out the same property, you would have paid Dh 2.14 million along with Dh 3,900 in annual Ejari fees. Most importantly, you won’t have a house to call your own.
The bottom-line is that the money you pay to buy a property in Dubai goes towards your name but renting gives you undeniable benefits like stability, flexibility and zero debt.
Why you should invest in Dubai’s property market
There is no denying that Dubai’s property market is one of the major markets right now and analysts have noticed a steady increase after the announcement of the Expo 2020.
The city’s phenomenal growth rate is one of the biggest reasons to invest in the Dubai real estate market. Between 2008 and 2018, the population grew by 86%. The tourism industry has grown in tandem – it is predicted to account for twelve percent of Dubai’s GDP in 2027. In simple terms, you will never face an issue with demand.
Additionally, real estate in Dubai offers good returns, especially when compared to other countries. Even during a slowing market, you can expect returns of about 6% to 10%. Moreover, loans for the Dubai real estate investment can be obtained at interest rates of approximately 4% which is again quite competitive when compared with countries across the world.
Of course, the emirate’s property industry is a high risk venture but as with all high risk investments, you can achieve higher returns with a Dubai investment property. This risk is because Dubai is a relatively young market; investment opportunities were only possible in 2003 so it can be difficult to understand such a quickly changing market and its influences. But, Dubai counters this risk with better returns. When we look at more mature markets with predictable cycles, they have lower returns than Dubai. The metropolis is the place for great returns, but only if an investor can completely understand the Dubai real estate market. Always carry out your due diligence and seek plenty of advice on how to proceed. The current market is ideal for those into long term purchases with an outlook of 5+ years and are interested in properties at the bottom of the pricing cycle. It is crucial that you stay committed to the region though.
Other than the investment side of things, Dubai’s stability as well as low crime rate, make the city a great place to live in, especially for retirees. The metropolis ranks amongst the top 10 safest cities to live in, is a regional hub and has a very high quality of life.
Furthermore, purchasing property in Dubai can make you eligible for a resident visa. There are some restrictions, mainly that your property must cost at least 1 million dirhams, should not be under a mortgage and is in a perfectly livable condition.
Oh, and did I mention it’s a tax free economy? Regardless of the value of the apartment, you will not have to pay taxes, and this applies to both residential properties and commercial properties.