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Investing in the UAE real estate market, especially Dubai, continues to be one of the popular options for a lot of investors around the world. Despite the softening of prices of properties in many of the residential clusters, it is still not panic station and most investors continue to repose faith in the market.
This is because the rental yields – the amount of money a landlord receives in rent over one year, shown as a percentage of the amount of money invested in the property – in Dubai continue to be among the highest in the world.
According to a survey by the UK Property Guide, the gross returns on investment from large to small apartments hover between 5.87 per cent and 7.21 per cent. This is significantly higher than most other global cities. For example, gross rental yields in Hong Kong stood at 2.82 per cent, India 2.22 per cent and Singapore 2.83 per cent, while London was between 2.72 per cent and 3.20 per cent.
Real estate experts peg the capital appreciation of properties in Dubai to around 2 to 5 per cent in the long term, which also makes it an attractive investment destination.
Mortgage rates have also come down in the UAE in the recent months which often makes paying a mortgage a cheaper option than paying home rents. If a homeowner decides to take a mortgage of Dh1 million to buy a house, his annual loans amount to around Dh57,000 (for a period of 25 years at the prevailing rate of 2.99 per cent).
The annual lease of a one-bedroom house in most localities in Dubai is around Dh60,000, which makes buying a house a more attractive option. However, it must be taken into account that a homeowner needs to make a 25 per cent down payment for the property before taking a loan.
As an asset class compared to equities, real estate is a more stable investment option even if its prices can rise and fall. Equities can be dramatically affected by company policies and performances while fall in real estate prices is over a gradual period.
• Property rental yields in Dubai significantly higher than other global cities
• With satisfactory capital appreciation of properties, Dubai appeals to many
• Mortgage rates have come down, encouraging investors to take the plunge
Get tips on debunking the lure of risky loans
Source: S. Dhar, Special to Properties
The writer is a freelancer