Dubai remains a smart investment choice

Property is a good hedge against inflation and must always be part of one’s investment portfolioPawan Dhawan

Grand vision and smart governance lie at the heart of Dubai’s success as a world city, making it an attractive property investment destination in the long run. With signs of the market bottoming out, many property buyers in Dubai are looking for the best bargain buys in prime locations. These signs indicate that investors can find more than enough room for an upside as we see possible traction in the property market by the next year, and real growth in the run up to Expo 2020.


Constant economic innovation, be it promoting the UAE as a global Islamic finance hub or driving growth through the World Expo, generates confidence about the emirate’s ability to follow diversified growth models.

This innovative approach to the economy makes Dubai an exceptionally cosmopolitan city, where professionals from more than 200 countries arrive for better career and business opportunities. Its ‘Smart Dubai’ strategy is also playing a significant role in achieving this and is expected to enhance the lives of around 25 million people each year, while the value of Internet of Things (IoT) applications alone will contribute around $1.17 billion (Dh4.29 billion) to the public sector by 2019, according to a report titled A Smart City for Public Value by the Mohammed Bin Rashid School of Government.

The large influx of people require long-term quality housing. Many new housing projects have been launched to cater to this demand, paving the way for savvy investors to get higher return on their investments. This, once again, makes property acquisition a sound financial decision.

Economic rationale

Property is a good hedge against inflation and must always be part of one’s investment portfolio. It is a hybrid asset with the capital  appreciation of a stock but the income producing capacity of a bond. Investors typically have more control over the nature, timing and size of real estate investments. Also, Dubai property is open to foreign investors, unlike the local stock market.

There are two fundamental reasons why this is a good time to buy property: low acquisition cost and respectable rental returns.

According to a recent report, the acquisition cost in Dubai is much lower than major cities around the world. The average price in Dubai is $468 per square foot, while it may go up to $3,208 in London. In fact, the cyclical nature of the real estate market, at this juncture, is particularly conducive for buyers in Dubai. The trick is not to get flustered by the price corrections and slowdown of 2015, downward pressure on rents and sales prices, and regulatory checks. None of these factors are debilitating.

Reputable research firms indicate that the housing market is close to  ottoming out, and will start to pick up towards end of 2016. In fact, last year was good for buyers in the secondary as well as off-plan markets. Keep a look out for developers who offer properties at lowered prices and give a variety of easy payment plans and incentives to attract buyers.

One of the most attractive aspects of the property market in Dubai is the prospect of respectable rental yields, considered one of the best in the world. Good performing areas of Dubai generate up to 7-8 per cent rental yield on average, whereas average returns in cities like London, New York, Hong Kong and Singapore are less than 4 per cent.

For the past six months, banks have noted a marked preference among buyers for resale transactions, where investors are taking advantage of the slowdown and buying fully functioning homes either for own use, or to put on rent. Tenants, too, are keen on buying apartments, lured by attractive financing and easy monthly instalments (EMIs).

Boost from banks

Demand for property typically picks up either during an economic boom or when there is easier access to bank financing.

In a less-than-upbeat market, when transactions are slow, banks can play an effective role by putting out simple yet attractive financing schemes. Banks also offer favourable rates with the option to lock-in fixed rates for the first few years. This way, customers who can afford the initial deposit can get a good financing package and remain unaffected by rate hikes.

Financial institutions offer a range of products not just for the UAE investors but also for non-residents on both ready and off-plan properties, with financing up to Dh25 million. For UAE investors, Sharia complaint equity release solutions are also available. Additionally, off-plan financing solutions that are Sharia compliant offer attractive opportunities
for clients to purchase under-construction properties. This, in turn, has also encouraged developers to launch new projects with multiple financing options, suitable for various income groups.

Source: Property Weekly


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