Reasons for Buying a Dubai Property
We often get asked to state the reasons why people purchase property in Dubai. Wherever, we discuss a property sale with a potential client, we always ask them to decide on the aims of their purchase and proceed accordingly – see below.
a. Buying for Investment
Most purchases are for pure investment and the property is never used by the owner. It remains rented out. The aim is to get maximum net rental income and capital growth whilst acquiring a property that will be easy to resell in the future. In such a case, the smaller and lower cost properties provide the best investment returns and these are the properties we recommend. If you have a larger budget – buy multiple lower cost properties rather than one expensive property.
Over 90% purchase a low cost (Studio or 1-bed) investment property. A good example is like our best seller 1-bed property – details of which are attached (1-Bed from £45.1k). Full price is AED 359K and rental income can pay for 25% of the property – so customers would end up paying about AED 271,000 (about £45,167) themselves. These offer about 8% net rental yield and come with rental guarantees. We would recommend such properties as the best for low risk investment.
- b. Buying for Pure Own Use
Such buyers are looking to live in Dubai (for work, small business or retirement) and use their own property all of the time. Our advice to such buyers is as follows:-
-Do not rush to purchase a property. Find out first where you will be working or have your business. The biggest issue we have had in the past is that such customers have purchased the wrong property in the wrong location (frequently they have just copied their friends) or their requirements have changed and the property purchased is not suitable for their needs.
-Our advice is rent for 6m to 1 year and get established – then consider a purchase. This time period will also enable them to become eligible for a Dubai mortgage .
-Consider the blue labelled areas (Marina, JBR, Greens, JLT or Palm) on the Openshore Dubai Property Map. These are good for own use, although prices are high.
-If you do not have a work visa or small business visa (e.g. you wish to retire in Dubai) – you will need to purchase a property of over AED 1m to get a property visa but the rules on these are set to be relaxed so that the AED 1m limit may be removed. Let us know if you need details.
-If you need own use in the future (e.g. for retirement in 3 to 5 years), then do not buy it now. Instead buy one or more lower cost investment type property that will increase your funds (high net rental, good capital growth) and then resell these in 3 to 5 years when you are ready to move to Dubai. At that time you will have a better idea of your needs, and then you can buy a more suitable property for you own requirements which may change between now and then.
c. Buying For Holiday Use
The law in Dubai has changed and private landlords cannot do short-term rental anymore (this is illegal without a licence). Rental agreements have to be for a minimum of 1 year. Thus many customers who were looking for a holiday type apartment have the following options:-
-Some want to use their own property as they make very frequent visits to Dubai. They have to keep the property vacant and still need to pay service charges and keep the utilities connected. They cannot do short term rental legally – thus it can become a cost rather than an investment and we would not advise this unless you were making several long visits to Dubai every year or living there most of the time.
-Most (about 80%) go for option (a) and purchase properties that are suitable for investment (high net rental yield; good capital growth and easy re-saleability) and keep these rented out. They keep the rental income in Dubai and use some of this for their holidays. This is more cost effective and convenient and is what we would recommend.