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Pros and cons of buying real estate in Dubai

Max
(updated about 1 month ago)
by Max

After reading this article, you will better understand if buying a property in Dubai is right for you. We will dive deep into various scenarios, such as purchasing property to

  1. live in Dubai
  2. make a good investment
  3. invest in offplan property in specific

This guide aspires to go deep and answer any questions on the topic. Let's jump straight into it:

1. Pros and cons of buying property when moving to Dubai

  • πŸ‘

    Visa acquisition

    Whether you want a plan B or just like collecting passports and visas - buying a property in Dubai will make it possible for you to obtain a visa. [Options are broad](/visa), but all of them will allow you to stay in the UAE for the whole year, granting you access to one of the best infrastructures in the world. The price of the purchased property must be at least AED 2 million to obtain a golden visa.

  • πŸ‘

    Safety and security

    Dubai has one of the lowest crime rates in the world. Whether you are tired of being robbed every second weekend or on the kill list of a blood-thirsty dictator, its safety protocols make Dubai the best place to live a peaceful life.

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    High living conditions

    Dubai is famous for its superb service industry. That includes hospitality, health, education, beauty, transportation, and many more. Therefore, living in Dubai often means living a better life.

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    Future outlook

    When you pick a place to live, it's essential to look at the direction that the government is taking. Dubai is continuously improving its already excellent living standards. While other governments try to survive, the UAE is playing to win.

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    Favourable tax conditions

    How much of your income are you currently paying to your government? With the correct tax setup, you can legally lower your personal income tax to 0%, depending on where you are from. There is no capital gains or property tax, too. Corporate tax has been set to 9% on profit (starting from AED 375,000) or other acceptable conditions. Globally, that's still a comparably modest tax rate.

  • πŸ‘

    Freehold ownership

    Many freehold areas provide full ownership rights on a property, no matter where you are from.

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    Political stability

    The UAE is positioning itself more and more as the new Switzerland. They do not engage in most of the global political circus. They do not engage in wars, do not pick sides aggressively, and try to keep beneficial relations with all nations in the world. The UAE is simply focused on growing itself.

  • πŸ‘

    Economic stability

    Many will point to 2008, when Dubai melted during the economic crisis, even much worse than other developing countries. While many say that people don't learn from the past and the subsequent economic turmoil will melt Dubai again, we disagree. We believe the government has learned its lesson and eliminated the reasons that brought down Dubai during that time. Back then, it relied more on the energy and real estate sectors, which tend to be particularly fragile during a crisis. Today, Dubai's economy is much more diversified. In fact, Dubai has depleted its oil reserves. Instead, it grew robust hospitality, technology, and business economies that should cushion in a crisis. The Dirham, the currency in UAE, is pegged to the strongest currency in the world, the USD (at a rate of AED 3.67 = USD 1). All this makes today's economy of Dubai unshakeable.

  • πŸ‘

    Payment plans

    This applies only to selected projects, but some developers offer payment plans even for already completed projects. They are generally less flexible and shorter in time, but they still enable a group of buyers who don't have the cash at hand and can not get a mortgage, also saving them additional costs from the interest rates that occur with a mortgage.

  • πŸ‘

    Golden networking opportunities

    After living in Dubai for one year, you will have made invaluable friendships with like-minded people. The most successful entrepreneurs from every industry, the most popular influencers, and the most skilled professionals either live here or drop in for a vacation. People are incredibly open; somehow, it's easy to meet the right ones here and start conversations casually.

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    The geographical center of the world

    Dubai is located extremely centrally, at the intersection between Europe, Africa, and Asia. You can reach half of the world within a 4-hour flight. Few places give you more travel convenience.

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    Major event industry

    Many significant events take place in Dubai. If you like sports, golf, tennis, horse racing, cycling, cricket, yachting, sailing, and much more await you. The tech community is also huge, hosting major crypto and software fairs. Interior and art exhibitions are hosted regularly, and just a 1-hour drive away, you can watch the F1 in Abu Dhabi.

  • πŸ‘Ž

    Invisible expenses of buying

    The cost of a property is often more than what is written on the price tag. As such, you will most certainly end up paying up to 4% of the land registration fees to the Dubai Land Department, insurance fees, agency commission, service charges while holding the property, and maybe even more. Generally, buying ready properties brings more expenses than offplan, and they may vary on the deal, but even so, buying property is cheaper than in most other countries.

  • πŸ‘Ž

    Expensive mortgages, if you even get one

    Interest rates in Dubai are often higher than in other countries, and as a newcomer with no job record in the UAE, it will be challenging to obtain a mortgage. On top of the mortgage value comes a typical arrangement fee of around 1%, plus 5% VAT.

  • πŸ‘Ž

    Painful purchase process

    Buying a ready property can be a nightmare. Sellers often will only let you in for a viewing if you come with a check (as a sign that you are serious). They will use you to test the market, making you commit without intending to sell in the first place. Agents will not appear at viewings, wasting half your day for nothing. Even though a property exists, many people have to buy based on videos they get sent on WhatsApp, just to discover that the walls are full of mold, which was not evident in the video material.

  • πŸ‘Ž

    No citizenship

    Frankly, it's unlikely that you will ever become a citizen of the UAE. A few foreigners were naturalized, like Pavel Durov (founder of Telegram) and GΓ©rard Depardieu (French actor), but these are exceptions.

  • πŸ‘Ž

    High costs of living

    Yes, with the correct setup, you may live here legally tax-free, but you will likely spend it all again to uphold a certain standard of living. This is not to say that you can't live reasonably cheaply here, but things like going out properly or having children, plain and simple, cost a lot of money.

  • πŸ‘Ž

    No democracy

    There is no voting system, and you have no voice in what direction the UAE should go. While most will view this as a negative, some people think it's beneficial, as it takes almost no time for political decisions to become a reality (vs. waiting for approval through multiple instances). Average, selfish Joe doesn't get to pollute politics with his nonsense.

2. Pros and cons of buying ready property as an investment (secondary market)

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    High Return of Investment (ROI)

    Plain and simple, most people who bought a property and to whom we speak made absurd fortunes.

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    Globally competitive rental yield

    Compared to other global metropoles like New York or London, Dubai has a much better rental yield (more than 200% / 300%, respectively)

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    Population growth

    Dubai has experienced unparalleled growth in the past decades, and it looks like it will continue for quite some time. The government set out to grow the population to 7.8 million (currently around 3.4 million) by 2040. It would be no surprise if they surpassed that goal. Those people need to live somewhere, and every year, rents across the city know only one direction: up. So, you can expect phenomenal returns on any property you buy in the long term.

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    Liquid real estate market

    The market for properties in Dubai is highly liquid. People fluctuate in and out at such velocity that it is pretty easy to sell your ready property quickly.

  • πŸ‘

    Vital flipping opportunities

    The real estate market in Dubai allows profitable flipping. Sometimes, you just make a good deal and can sell the property the next day with a premium. Renovating a unit in Dubai is also reasonably cheap, after which you can sell it with a good profit.

  • πŸ‘

    Demand surpasses supply

    On the very base level of a market, there is always supply and demand. As long as properties are snatched within days or even hours, people run in hordes to a sales center to purchase villas for millions of dollars, and buyers are left with empty hands because they hesitated for five minutes, there is no doubt that the demand soars beyond any supply.

  • πŸ‘Ž

    The illusion of choice

    Hundreds of properties change hands daily in Dubai, and thousands are offered for sale. You would think that you have an enormous range of options here, but how many properties can you visit yourself before deciding on one? And the options you visited yesterday often won't be available tomorrow anymore. In practice, your options are limited in the market, although good agents can take off a good amount of work from you and help you pick the right property. But again, many agents will leave you in the dust and care little about your needs.

  • πŸ‘Ž

    Supporting low cost labor

    Like in many other places, developers in Dubai buy cheap labor from developing countries. When you walk past construction sites, you will see a lot of Indians and Pakistanis, who usually live in poor conditions. You can't change it, and it's probably not much better elsewhere, but if you don't want to actively support this practice, you should not buy real estate in Dubai for your pure profit.

3. Pros and cons of buying offplan property (primary market)

While some of the pros and contras of ready properties apply to offplan properties, too, there are some additional points to consider:

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    Brand new property

    The appeal of being the first occupant of a brand-new property can be significant for your future tenants and any buyers you might want to sell to.

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    Potentially even higher Return of Investment (ROI)

    When you buy an offplan property, you don't buy a property. You buy a promise that someday the developer will hand you the keys for a property that looks like the one you saw in some rendered images. That means you have to wait for the property to be constructed, and you need to trust that everything goes as promised. In return for that increased risk and the time delay, you pay less than what you would if that property existed today. If something goes wrong, you are potentially in trouble. But if it goes well, and the day of the handover has finally arrived, you stand high as the owner of a new estate that is now considerably much more worth than what you paid. Which drastically increases your ROI. That being said, offplan properties increase in value even during construction, just because there is a constant shortage and construction has progressed.

  • πŸ‘

    Flexible payment plans

    There are many options to pay for your offplan property, even stretching after years of handover. For many people, that saves the need for mortgages and allows them to become property owners even if they don't have the total amount at hand.

  • πŸ‘

    Various perks from developers

    Many projects come with additional perks. The developer may exempt you from the DLD fees wholly or partially, offer you a guaranteed ROI for a few years, or waive the service charges for a period.

  • πŸ‘Ž

    Risk

    With offplan properties, there is a lot of risk because there is a lot to gain. Construction delays and increased risk of quality issues make offplan investments challenging. There is even a risk of being scammed, although that's extremely rare due to high government regulation in the sector. If you do some research and think critically, when someone offers you a property 50% below market value and asks to wire money to their personal bank account, you have nothing to fear.

  • πŸ‘Ž

    Waiting time

    Obviously, if you buy into a project before completion, you must wait until handover before you can use it for anything. If you want to move to Dubai, you need another ready property or a place to rent. If you plan to move to Dubai later or your goal is exclusively investing, offplan properties are often the better choice.

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Max
by MaxOffplan-specialist since 2014
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