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Investing in real estate in Dubai in 2021

Investing in real estate in Dubai in 2021

Today it becomes obvious that 2020 was a turning point for the entire world economy, and not for the better. All sectors of the global market and all countries participating in it have suffered.

Dubai is a city that lives on trade, transport, construction and tourism. The COVID-19 pandemic and subsequent international restrictions on movement between countries have hit the emirate hard.

A particularly significant blow fell on the tourism sector, which declined by more than 3 times, receiving only 5 million tourists in 2020. For comparison, the stable annual influx of tourists in the pre-pandemic years was 17 million people.

The demand for renting and buying real estate, residential in general and elite in particular, has significantly decreased.

However, by the end of 2021, it can be argued that the Dubai economy has begun to recover.

Long-term records for the influx of investors (more than 8,000 new players on the market, according to Khaleej News) and the number of operations (about 55,600 in 2021) have been broken. Developers report a profit of several hundred percent, especially noting the market for small villas, and plan to build hundreds of thousands of new objects for decades to come. They are now already building 60,000 units of real estate per year.

The content of the article:

Why should we pay attention to the Dubai market?

We have already discussed in detail the question of why Dubai real estate is a promising sector for investment.

If you want to get acquainted in detail with the general characteristics of the Dubai construction sector, we recommend following this article.

For this article, we will need to highlight two main points.

  • The Dubai real estate market is specifically designed to attract investors. This should not be surprising, given that it provides up to 20% of the emirate's total GDP and has more than a dozen large developers with huge production capacities that should not be idle.
  • The Dubai real estate market is in a state of dynamic stability. This means that it is still characterized by natural price fluctuations and crisis phenomena, however, being located in the core of the multidirectional economy of the Arab Emirates, it always recovers quickly.

Due to the strong interconnectedness of the main sectors of the Dubai economy, it is not the easiest task to understand where to invest at the moment and when to wait.

Dubai

What you can earn in Dubai, and what you can't earn on

It makes sense to divide the emirate's investment field into four dominant categories in 2021: luxury housing, the middle segment, commercial and project real estate.

The first two include residential properties: apartments, penthouses, townhouses, villas, hotel-apartments and so on.

The third category includes offices, industrial premises, warehouse and sorting spaces that are popular with companies engaged in online commerce.

The fourth category is mixed and is dedicated to the purchase and sale of land and real estate that are at the project stage or in the early stages of construction.

Against the background of the pandemic and international restrictions, the tourism sector has suffered the most, and as a result, luxury resort housing.

Dubai is known for its wide opportunities for luxury holidays. This is why tourists usually come here. This does not mean that the entire tourist flow consists exclusively of wealthy foreigners. People with much more modest savings also come to Dubai on a grand scale.

As a result, a huge profit is usually brought by renting expensive and elite housing, whether it is hotels, apartments and even small villas. It is worth adding to this that a small but extremely rich stratum of expat foreigners has provided a large profit in this sector. And this category of people was also cut off from Dubai against the background of international restrictions.

This led to a drop in the overall demand for real estate and, as a result, a decrease in prices for objects.

The middle segment feels much better. This sector, of course, does not show great pace, but it is still growing, and many developers are holding on due to the implementation of this particular proposal. According to Fam Property, the growth of the commercial sector in Dubai in October 2021 was 94% compared to the same month last year. In November, it was 56.5%.

The commercial sector is doing well; Fam Property reports 55,664 registered transactions in 2021 compared to 35,220 in 2020. But this is an extremely specific market and it is not suitable for all investors. When working with commercial objects, it is necessary to carefully understand the current situation in the emirate, especially in the Internet commerce sector. The help of business consultants and other specialists is absolutely necessary here.

In the commercial real estate sector, it will not be possible to earn money by reselling, but you can get a stable high rental income depending on the area – up to 8% per annum, according to Dubai Buzzle.

The last category is housing under construction.

"Off-plan" deposits are the most profitable type of investment at the moment. The benefit lies in the fact that the purchase of barely started projects at a reduced price will not only bring income due to an increase in the value of real estate during the construction process. You will also earn money on the overall recovery of the Dubai economy.

It is expected in the second half of 2022 or in 2023. Given that the average construction period of the object is 2-4 years, both cycles overlap each other.

As a result, the price of the finished project will include both an increase upon completion of construction, and an increase from the restored demand.

Dubai recovers from the crisis of 2020

According to Property Monitor, the main indicator of the sector's recovery was the average cost of transferring funds per transaction: 16.77% in the case of villas/townhouses and 17.1% in the case of apartments. This category accounted for 77% of all real estate objects sold.

This shows an increase of 36.5% in the total volume of operations and an 83.8% increase in the cost of operations when comparing May 2021 and May 2019.

The international analytical company GlobalData separately notes that we should expect a geographical shift in the construction sector to the south of Dubai.

One of the main reasons is the presence of the Al Maktoum International Airport in this area, the Expo 2020 exhibition zone and the Dubai South complex, which has been launched into construction.

All this will increase investment in the real estate sector in the coming years.

It is worth noting separately the main source of the upcoming growth of the Dubai tourism sector and, as a result, the growth of demand and prices — Expo 2020.

At the end of November 2021, 4,766,419 people visited the global exhibition in Dubai, with a virtual visit of 23,500,000 people.

Within the framework of the exhibition, the government of Dubai focuses on several topics related in one way or another to investments in the economy, real estate, environmental and technological projects, for example, the world's largest solar energy project.

The event is designed to attract the widest audience. In view of this, we can identify those areas of the city in which there will be the greatest influx of tourists.

A large demand for renting and buying apartments can be expected in the districts closest to the exhibition:

  • Jumeirah Golf Estate;
  • Mudon;
  • Town Square.

High demand to rent and buy villas is predicted in

  • Jumeirah Gulf Estate;
  • Al-Furjan;
  • Mudon.

The general growth in demand for real estate can be expected in the districts:

  • Downtown Jebel Ali;
  • Downtown Dubai;
  • Burj Khalifa;
  • Business Bay;
  • As well as Dubai South, Town Square и Wasl Gate.

According to information published by Knight Frank, based on the results of October 2021, the total number of transactions to date is 48,651 and their value exceeds $48,000,000,000.

In addition to these indicators, it is worth noting several other points that have a positive impact on the development of the sector.

  • Distribution of the vaccine among the population. The state increases the volume of purchased vaccines and expands the places where they can be obtained, for example, at airports and other places of arrival of foreigners. At the same time, the quarantine restrictions remain quite loyal. According to the Corona Tracker service, 89.3% of the population has been vaccinated in the UAE at the moment, of which 8,832,256 people have been fully vaccinated.
  • Amendments to the law on granting citizenship to investors, emigrants and their families are being considered, which should significantly simplify the process of obtaining a residence permit.
  • The program for granting golden visas for 10 years is being expanded, especially for engineers, IT industry workers and scientists. The same visas are received by investors who have invested more than 5 million dirhams or 1.36 million dollars in the economy of the Arab Emirates.
  • The areas that provide an opportunity for full and unconditional ownership of real estate and business are expanding, without the need to have intermediaries or shareholders in the face of UAE citizens.
  • The demand for large, but relatively inexpensive residential real estate is growing, due to the transition of many sectors of the world economy to remote employment. Such areas are needed in order to organize joint living and work of large associations of employees.
  • Interest rates on loans, including mortgages, are being reduced against the background of already record-breaking cheap housing in Dubai.

As you can understand, it may be difficult for a private investor to understand this environment and take into account all possible market features in order to make a correct and timely investment.

Dubai

How can cooperation with our company be useful for you?

It is important to understand that most of the market participants in Dubai use the services of local and international real estate agencies. Moreover, both buyers and sellers have their own specialists at their disposal, specific for this role.

It is necessary to understand that it is possible to work with these people independently, but this will probably put you in an extremely inconvenient and disadvantageous position.

Having your own agent, the opportunity to get advice, an explanation of all the key issues and an analysis of the current situation will at least put you on an equal footing with real estate sellers.

At the same time, as you could understand earlier, Dubai is a specific region with its own special rules and laws, tax regimes and benefits. The sectors of the emirate's economy are extremely interdependent, so it is difficult to get complete information by studying only one or two narrow aspects of the market.

It is necessary to choose the right place and object, evaluate it, know the current economic and financial situation, the course of changes in rental rates, and so on.

That is why our company is focused on providing you with full support from the selection of an object to its full registration in your personal asset. All this takes into account the need to obtain licenses, pay fees and issue all key permits.

If you are interested in the opportunity to make money on investments in Dubai, please contact us.

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