Two of the most popular countries considered by International Investors for property investment are the UK and Dubai. Our group companies (Find UK Property and Openshore Dubai Property) sell and manage property in both of these locations, and so we thought we would give you a summary comparing these two options – UK Property or Dubai Property.
Property in the UK
The UK is one of the securest places in the world to buy property and to own property for the long term. The UK is ‘open’ for investment and any buyers of any nationality can purchase property here. Most people including all UK and EEC nationals and many other countries can get an income allowance of £10,000 per year – so their investment is effectively tax free.
The main reasons for purchase are:-
- Security of buying process with involvement of solicitors on both buyers and sellers sides
- Security of long term ownership. Investors have more confidence in the UK than any of the Middle East countries.
- Good rental yields for lower cost properties in the North of England. In the past London was popular – now lower cost properties are the most popular. 2-bed terraced properties can be purchased for less than £53,000 with 8% rental yields.
-As the UK is entering a recovery phase, there is expected to be good capital growth. The lowest cost properties are expected to double in 5 years.
Property in Dubai
As well as good rental yields for low cost properties, the capital growth in Dubai has been very strong with property prices almost doubling in past 2 years. (See the chart below – which shows relative pricing since 2003 and forecast pricing in yellow until 2017. After big falls in 2008 and stability for past 4 years, Dubai prices rose rapidly in 2012 and 2013). This capital growth has been the main reason investors have been currently buying in Dubai. Some plan to sell their properties in about 1 to 2 years’ time, after benefiting from capital growth and then switch to a property in the UK!
Whilst Dubai is probably the most stable of the Middle East countries, many investors do not think that long term security is as good as the UK – thus they prefer the UK. The rapid growth over the past 2 years has also worried some investors that any bad news could result in Dubai prices falling again. Dubai property is now relatively expensive again. Our view is that there is unlikely to be another collapse in Dubai and property price growth will just slow down gradually but it is difficult to predict the future.
So which country is best for investment property?
The right property in both countries can deliver good rental yields – higher than 8%. These tend to be the lower cost commodity properties that are have high rental demand.
However, prices in Dubai are now quite high and if you are looking for good value and maximum long-term security – then the UK is unbeatable. By investing in the right type of UK property you could achieve similar returns to Dubai with much lower long-term risk.
On the other hand, most analysts still feel that capital growth in Dubai over the next 3 to 5 years will exceed that in UK and for that reasons it may still be a good investment. If such forecasts are fulfilled, the prices in Dubai could double from the current levels in 5 years.