What is behind strength of Dubai’s real estate proposition?
Dubai’s real estate growth is driven mostly by a combination of overseas investors living all over the world, and foreign nationals living in the UAE.
For 2017, the Dubai Land Department (DLD) recorded a total of 69,069 completed real estate transactions. The combined value of these transactions is more than Dh 285 million ($77.6 billion). This figure breaks down as Dh107 billion ($29.15 billion) invested by 39,480 investors making 52,958 transactions, and more than 65% of this is by foreign investors.
The total value of the land transactions in Dubai in 2017 is worth Dh285 billion. To put this figure into context, this is higher than the GDP of an astonishing 144 countries from the 211 recognised by the United Nations.
Figures show that around 23,000 non-GCC (Gulf Cooperation Council) and non-Arab investors completed 30,000 property transactions worth about Dh56 billion. Around 9,790 nationals completed or were involved in just over 14,380 transactions with a combined total of more than Dh37 billion. Almost 7,000 investors from Arab states but non-GCC completed 8,644 real estate transactions worth more than Dh14 billion.
Where are overseas investors, in Dubai’s real estate, from?
The largest number of foreign investors in 2017 came from India, making Dh15.6 billion worth of property transactions in Dubai. Next on the list was Saudi Arabian nationals who collectively invested more than Dh7 billion, then British and Pakistani investors whose investments came to Dh6 million and Dh5 million respectively.
Other nations investing increasingly in Dubai’s real estate are China, Egypt, Jordan and Canada.
Why is Dubai’s real estate attracting this amount of investment?
These figures are extraordinary, particularly when it’s considered the total investment is higher than many countries’ GDP (gross domestic product), as mentioned earlier. The reasons behind this phenomenal overseas investment lie within the unique advantages Dubai offers as a global investment region.
The biggest reason for the investment specifically for the real estate sector is the very attractive RoI (Return on Investment) that can be earned by investors. This is a main consideration for any kind of investor before making a decision.
Rental income is an important consideration as part of the RoI as it matures straight away, when compared with capital appreciation that can only be achieved through the sale of the property or by releasing equity through a mortgage.
Average RoI in Dubai
The average amount of RoI earned on apartments in Dubai in 2017 was 7%. Villas achieved 5%, despite a general softening of sales prices and rent amounts. Research shows that for a two-bed apartment costing Dh1 million, an investor could net rental returns of Dh80,000. This is an 8% annual return on investment and would lead the investor to recover the entire investment within just 12.5 years even without inflation.
However, it’s worthwhile taking the post hand-over payment plans that are used by some people. This is where the buyer/investor pays 50% or Dh500,000 when the property is handed over, with the rest due within three to five years. As the rent from the very first day would remain the same, it would mean a RoI of 16% for the investor.
World-leading real estate sector
Dubai leads the real estate sector globally in terms of major cities offering investment hotspots. Returns average between 7 and 8% per year, which is high when compared with other high performing cities.
The sector is also helped with the solid regulatory environment. This reassures investors and ensures protection. During the last decade, the DLD has strengthened the regulatory and legal framework to make sure best practice is in force at every level of property management, from development to sale.
In addition to these positive points, Dubai has an accessible and liberal foreign exchange regime that promotes strong connectivity with investors from overseas. As it allows the free movement of profit and capital with little to no restriction, it’s obviously an attractive proposition for major investors.
This infrastructure is being refined all the time and is consistently improving. The progressive economy, consistent and continuous expansion of major infrastructure and world-class attractions has completely transformed Dubai into the five-star property investment destination it is today.
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