Real estate in Dubai has been a sought-after asset among domestic and foreign investors for more than two decades. Like all other investment markets, it has its ups and downs. At its peak, the city offered some of the highest returns you could ever find in any real estate market in the world. For example, luxury villas for sale in Dubai had the highest return on investment (ROI) rate.

As the emirate has entered the post-pandemic era, the market has started to thrive again, especially on a global scale. Moreover, there is an opinion among analysts and investors that this third growth cycle will be more sustainable than the previous two. The official source of AX Capital describes the main current aspects of the Dubai real estate market that should be borne in mind in the following article.

The current situation

Last year ushered in impressive growth that continued into 2022. The housing demand in Dubai was such that from January to March, just in 3 months, more than 20,000 units were sold. This was the largest volume of transactions in the first quarter in history.

Demand was spread among all types of property assets. Sales of villas and apartments rose significantly, while transactions for off-plan housing soared by almost 100%. The secondary market saw a nearly 75% surge in sales.

What is the outcome of this demand on prices? As might be expected, if you were to purchase a residential unit in the metropolis last year, there was a good chance that you would have made a staggering profit in just one year. It has been shown that villa prices have risen by 20% over the last 12 months, while apartment prices have also shown strong growth, with nearly 10% capital gains.

Analysts still expect the Dubai market to grow steadily until 2024, with an average annual return on capital of 3 to 6%. This is despite the downturn in the global economy. It’s essential to realise that all of this is happening at a time when numerous other international real estate markets may see a decline or a more severe correction.

It is also worth mentioning that Dubai has recently made improvements and simplified the real estate transaction process. Even overseas investors who have never made a deal in the United Arab Emirates or even in the larger Persian Gulf region, have trust in the emirate’s reliable and open system.

How to buy property in Dubai in 2022

If you are interested in selling or investing in real estate in the emirate, all you need is a passport. To a large extent, this is the same requirement for all the transactions. Speaking of properties under construction, the process can be even easier as there are no special permits or documents required for real estate developers.

A Form A contract will be signed between a seller and a broker or an agent, and a Form B contract will be concluded between a buyer and a broker or an agent. Of course, it is best to consult with an attorney.

There is also a Form F (MoU/the Memorandum of Understanding) contract and a sale agreement between all parties to designate a transaction. The MoU is similar to the exchange stage in many other global real estate markets. You, as the buyer, are required to make a 10% deposit at this stage. In the rest of the cases, this is actually a security deposit that is refunded (or, more likely, reduced from the remaining purchase price) once the transaction is completed.

Rent in freehold zones

In Dubai, as in most luxury real estate markets in the world, real estate is classified as either free-owned (freehold) or being on a long-term lease (leasehold). Freehold is relatively simple in the sense that after the transaction, you will own the unit and the land on which it is built.

Rental real estate is acquired under long-term lease basis. In fact, it means the reservation of property and a land plot for a limited period of time. In Dubai, these rental agreements are primarily for 99 years. Practically, until the lease is about to terminate, the distinction between leasehold and freehold often has minimal affect on future value.

Which is better: off-plan units or finished properties?

There is no clear preference among investors. Both accommodation types have some pros and cons over others. Off-plan units tend to be more available. This is because you purchase a home during its construction stage, so basically it doesn’t actually exist yet.

Payment plans for off-plan real estate vary for each developer, but they include a series of regular payments over the construction period. They end after construction completion and the commissioning of the project. Some payment plans can also be extended for several years after completion.

A secondary market purchase is distinguished by the fact that the property is completely ready, and the buyer can move in right away after signing the required documents. In addition, compared to off-plan properties, ready-made real estate is much easier to obtain a mortgage for. Most lenders need a down payment of about 25% of the property’s value.

In the end, the choice between an off-plan house and a finished unit can only be made by you. Your time frame, capital availability, risk appetite, and standard real estate factors such as location and quality of construction will influence this decision.

What will happen after the purchase?

It is obvious that you will want to make sure that both the transaction and your ownership are registered with the appropriate authorities. In most cases, your broker or agent will handle this process.

After that, it remains just to pay the mandatory service fees and connect utilities. The connecting of utilities typically takes place around the final payment time because many properties in Dubai are bought during the construction phase. Make sure the seller has paid any outstanding utility bills if you are purchasing a pre-owned home, and request a No Objection Certificate (NOC) from the developer to secure a new RERA contract (public utility provider).

What is a “Golden Visa”?

The Golden Visa Program is a scheme supported by the Dubai government that allows you to obtain a long-term visa for the acquisition of real estate for a certain amount.

The Golden Residence program provides a 10-year visa. It has recently been updated and simplified to ease the criteria. It has additional benefits and flexibility to visa holders as well. So, the minimum threshold for the value of purchased housing was reduced from AED 10 million (USD 2.72 million) to AED 2 million (USD 544.5 thousand).

Investment-attractive options in Dubai?

It is important to remember that in Dubai, real estate is mainly represented by first-class options. You can count on high quality and a renowned location wherever you buy. However, you may discover a variety of neighbourhoods and homes in Dubai’s micro-markets for every budget range.

Investment-friendly areas that are easier to enter include:

  • Jumeirah Village Circle (JVC);
  • Jumeirah Lake Towers;
  • Damac Lagoons.

Due to lower rents and therefore high demand from tenants looking to live there, JVC is particularly popular.

Middle-range options are sold in Dubai Marina and Business Bay.

Market leaders tend to be Palm Jumeirah with luxury villas and Downtown Dubai, a popular destination for apartment buyers.