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Any real estate purchase always starts with the question — why do I need it? Do I want to live here, go on vacation or make money on it?
It is always easy to get lost in proposals when starting your search in different international real estate markets. It takes a lot of effort and money to study it.
In this article we have tried to describe and categorize the types of real estate in the UAE and tell you which are the best for specific purchase purposes.
Contents:
- Main types of real estate
- Real estate for temporary residence and vacation
- What to buy if you are an expat
- The most prospective categories of real estate for earning money
- Conclusion
Main types of real estate
The entire market of the emirates can be divided into two categories: commercial and residential real estate.
Both types are suitable for earning money, but the first one can be quickly converted for your own use and living, and the second one is used good for commercial activities and business.
Residential real estate is suitable for earning both rent and flipping (buy low and sell high). Both individuals and companies are interested in it.
Types of real estate, which are included in this category:
- hotels;
- apartments;
- penthouses;
- villas;
- townhouses;
- working spaces.
Usually, commercial real estate is intended for earning on rent, which is often provided to companies for quite a long time.
If rentals are usually concluded with a contract for a year, then commercial property can be rent for 5, 10 and even 25 years.
Types of real estate, which are included in this category:
- offices;
- retail spaces;
- exhibition areas;
- storage spaces;
- sorting spaces;
- industrial spaces.
It is quite difficult to make money on commercial real estate by flipping. However, it is possible.
Usually, those who choose to earn money on commercial real estate, try to diversify their portfolio as much as possible with different types of property.
It is more difficult to enter this market than the residential one, but in the future, it will provide a larger and more regular profit. However, it’s not without its risks. For instance, some types of commercial real estate lost their relevance when the COVID-19 pandemic began, and a huge number of employees were reduced or transferred to remote working.
Real estate for temporary residence and vacation
In this section, we will talk about the real estate that you may need:
- You are going to regularly come to the UAE on vacation.
- You are a tourist who decided to come to the UAE once to study this country.
- You are a traveler who uses the UAE as a transit point in your international movements.
In all the cases mentioned above, you are unlikely to need to buy spacious real estate. It will be much more profitable to choose something from the following types:
- hotels;
- studios;
- one- or two-room apartments.
Villas are luxury and expensive real estate. Moreover, you will have to serve it, even when you are outside the country. It will cost about USD 500 – USD 1000 per month.
Considering that you are a tourist or a traveler who is unlikely to spend more than a month or two in the UAE, or decide to turn your vacation into suffering by coming to the Emirates in the summer, it will be extremely unwise to advise you to buy villas.
Compact real estate and hotels
Compact real estate includes studios and small one-room apartments.
It is worth noting one important thing. Residents of the CIS countries may be familiar with the difference between flats and apartments. Flats are used for living, and apartments are non-residential and commercial real estate, which can sometimes be used as a hotel.
In the UAE, as well as in most countries of the world, flats and apartments are the same things. This residential property is an overwhelming market share (about 87 % of the residential sector).
If you are a tourist or a traveler, studios and one-room apartments are best suited for you. They are widespread in the Arab Emirates. It is cheap for rent. It provides more than a sufficient list of amenities. It is often located in the most developed urban areas, where there are all the necessary development projects and a developed transport infrastructure.
Hotels are perfect if you expect a fairly luxurious vacation in the UAE for one to three months in the most prestigious resort areas.
Hotels are cheaper than full-fledged multi-room apartments, but more expensive than studios and one-room apartments. The reason is the additional fees that you pay when renting a hotel room. These are tourist taxes. It is usually included in your rental, restaurant and various resort entertainment bills.
In some cases, this will be additional USD 2 – USD 6 for each night spent in a rented hotel room. For instance, in Abu Dhabi, this is a 4 % margin on the invoices and checks.
The price also changes if the hotel is located in expensive resort areas. So, in Dubai, lots of hotels are located in the luxury area of Palm Jumeirah, the coastal area of Jumeirah, Deira and Jumeirah Lake Towers (JLT).
The focus on expensive and luxurious rest distinguishes hotels from studios and one-room apartments. If you are thinking of renting a room in a hotel, you shouldn’t forget about the location of the nearest clubs, restaurants, branded cafes, shops, various entertainment venues such as private beaches, swimming pools, golf courses and so on.
To sum up, you have to know the differences between studios/apartments and hotels: the first one is used to provide a comfortable, short-term and cheap stay in the Emirates, the second one is used for a luxurious, expensive vacation on the shores of the Persian Gulf with all the amenities.
Apartments
In this section, we are going to talk about spacious apartments, such as one- or three rooms.
If you visit the UAE quite often and by some seasons, so you can choose this option. In this case, you will have a spacious private place, which, if necessary, can be used as a working space.
Such apartments are often located in prestigious resort areas. Of course, it is more expensive, but if you think about the money you can spend on a seasonal hotel rental, so it will turn out to be a more profitable purchase.
In this situation, it also makes sense to think about buying such apartments. However, we recommend to rent this property.
Here is an example. In one of the most luxury areas of Dubai Marina, an annual rent of three-bedroom apartments will be USD 50,000. However, if you want to buy a one-room apartment at the same place, it will cost at least USD 500,000.
What to buy if you are an expat
What property is suitable if you plan to become a permanent resident of the UAE?
The best option is to buy villas, townhouses, spacious apartments or penthouses.
It will be more profitable for you. Besides, real estate for USD 272,000 can give you an opportunity to get a visa for 3 years and a resident card, i.e. Emirates ID. It can be updated without any restrictions as long as you meet the criteria. While you just need to appear in the United Arab Emirates once every 180 days.
If you are a wealthy buyer, you can buy real estate, which is cost USD 1,360,000. Then you will be granted a 5-year visa. The visa renewal conditions are the same and it is not limited.
Villas and townhouses
What are villas, and how do townhouses differ from it?
Villas are a full-fledged, independent residential property. There can be both compact and spacious.
Villas are luxury real estate. However, it would be reasonable to divide it into family and luxurious. The situation is quite similar to hotels.
Luxury villas are hundreds of square meters. Usually, it has three bedrooms and more. There are many additional amenities, such as private gardens, rooftop pools, parking lots, gyms, small golf courses or places for tennis and basketball. Besides, it is made of the highest quality materials. It is often located in the most prestigious and resort areas of the UAE.
As with hotels, one of the main selling points of this property is its proximity to various entertainment venues, clubs, expensive restaurants, brand stores and shopping malls.
Prices for such real estate start at USD 10,000,000.
Family villas can also be quite spacious, but usually it has from one to three bedrooms. It is cheaper. The basic amenities meet the requirements of expats who expect to stay in the UAE with their spouses, children, pets, etc.
The specific of such real estate isn’t expensive price, but a favorable location near private schools, kindergartens, clinics and hospitals. An important marketing point is green spaces, such as private gardens, parks, walking areas and bike paths.
Usually, large shopping malls with affordable prices are located nearby.
These villas are much cheaper than those in the first category.
Let’s take Dubai and one of the most popular areas of family villas — Arabian Ranches 3 as an example. A house with four bedrooms can cost no more than USD 1,100,000 in this area. A three-room villa is about USD 380,000. Prices are the same as for expensive compact apartments in the luxury Dubai Marina.
A distinctive feature of the villas is the location inside autonomous communities or clusters. These are areas that live according to the principle – «a city within a city». It provids all the necessary amenities so that you do not have to leave the territory of the community in order to meet the needs of the first necessity.
These clusters are fenced off and guarded by private firms that are hired by real estate developers.
The main difference is that only you and your family members live in the villa. However, in the townhouse you have to live with several independent families, which will be your neighbors.
Due to this, townhouses are a bit cheaper than villas.
Thus, if you are planning to become a resident of the United Arab Emirates and move to the country with your family, villas are your best choice.
If you are a freelancer or you don’t need to be in a certain place while working, then your home is probably always your office.
Villas perfectly meet this need. It was noticeable in the first half of 2021, when, due to the background of low mortgage interest rates (2 - 4%), a huge number of local workers paid attention to the villa market.
The amount of the first payments decreased by 20-25%, the average amount of the mortgage taken out increased by 24%, that is about USD 600,000. The number of mortgages taken out by each bank increased by an average of 5%, and 50% of all loans were spent on the villa purchase.
It should be noted that villas cover only 13% of the residential real estate market.
If you are a single expat or you have a partner or a spouse, but you are not planning to have a full family yet, then you will be interested in buying luxury villas and townhouses.
If you decide to buy villas, then the best areas in 2021 are the following:
- Al Reef, Abu Dhabi;
- Saadiyat Island, Abu Dhabi;
- Yas Island, Abu Dhabi;
- Mohammed Bin Zayed City (MBZ City), Abu Dhabi;
- Al Raha Gardens, Abu Dhabi;
- Palm Jumeirah, Dubai;
- Jumeirah, Dubai;
- Arabian Ranches 3, Dubai;
- Emirates Hills, Dubai;
- Al Barari, Dubai;
- Mirdif, Dubai;
- Mohammed Bin Rashid City (MBR City), Dubai;
- Dubai Hills Estate, Dubai.
Spacious apartments и penthouses
The situation with spacious apartments is the same to the previous section for more compact apartments. The only significant difference is the size. It is more space, more rooms, more expensive materials, higher prices and more additional amenities.
If villas are an option for those who are looking for a mixture of quiet life with the opportunity to follow active city life, then apartments are especially for those who want to experience the pace and quality of luxury life in Abu Dhabi, Dubai or other emirates.
It makes sense to buy such a property. However, you will also need more money. In Dubai Marina, spacious apartments are from USD 2,000,000 to USD 5,000,000. In Dubai, especially Downtown Dubai, prices will jump to USD 2,500,000 – USD 6,000,000.
But at the top of this luxury category are penthouses. It is more expensive, but it become even more valuable due to the fact that its number on the market is quite tiny. Moreover, the demand among wealthy expats is high.
Penthouses are the same apartments, but it is located on the upper floors of high-rise residential properties and skyscrapers.
Usually, it has from four to six rooms for various needs. Additional amenities include home cinemas, private pools on the roofs of skyscrapers or mini golf courses.
Penthouses also often have several tiers/floors, i.e. duplexes.
Prices for this real estate start from USD 3,000,000 – USD 3,800,000 and quickly grow up to USD 10,000,000 or more.
These are the best areas for buying apartments:
- Masdar City, Abu Dhabi;
- Al Maryah Island, Abu Dhabi;
- Corniche, Abu Dhabi;
- Dubai Marina, Dubai;
- Downtown Dubai, Dubai;
- Business Bay, Dubai;
- Dubai Creek Harbour, Dubai;
- Dubai Sports City, Dubai;
- Dubai Silicon Oasis, Dubai;
- International City, Dubai;
- Discovery Gardens, Dubai;
- Jumeirah Village Circle / Triangle, Dubai.
The last eight points are also perfect for those who are ready to earn money on their property by starting to rent it out. Perhaps, it is due to the upcoming world exhibition Expo-2020 in Dubai that will last six months and attract millions of people to the territory of the emirate.
The most prospective categories of real estate for earning money
Here is the list of real estate that can help you to earn money.
First, let’s point out commercial real estate. It is often rented by companies, especially international.
It is more difficult to enter this market than a residential one, since it requires more experience and understanding of the UAE economy. However, this type of property has its advantages.
The advantages are the following:
- High price, since the supply is quite limited. The demand is always growing.
- Commercial real estate provides the best ROI (Return on Investment Index) indicators for the sector.
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The capital cost is growing faster than other types of property. Moreover, this cycle is self-sustaining.
Commercial real estate is highly susceptible to competition. Given that its proposal is quite narrow. Each property quickly gets its own reputation that distinguishes it in the market.
The increase in the capital cost occurs faster, the more often and longer such real estate is used. The higher the price of such real estate becomes, the higher its reputation and the more often renters pay attention to it.
- Rental and leasing terms are more flexible. The rental terms are several times longer than the terms for residential real estate. Seasonality doesn’t strongly influence commercial real estate.
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The renters of commercial real estate are more qualified and have a greater creditability than individual buyers of residential real estate. In addition, all data on the realty company is always available. You can get acquainted with it before signing a contract.
In addition, any company always conducts a market review in advance when choosing suitable properties. Therefore, if a large organization is ready to sign a contract with you, you can be sure that it is extremely interested in your proposal.
Among the real estate that we have already mentioned above, the following properties will suit you for earning money.
If you try to find a property for renting, then the best options will be studios, apartments and hotels.
Villas, townhouses, penthouses and spacious apartments are best proper for flipping.
It is also necessary to note working spaces, which recently have been in high demand among rental companies. Now it is going through hard times.
Let's clarify what we are talking about.
Real estate for small, but long-term earnings, i.e. rent
The following real estate is suitable for rent: commercial real estate, working spaces, studios, apartments and hotels.
Commercial real estate is subdivided into offices, retail and exhibition spaces, warehouses, sorting spaces and industrial areas.
Which categories should you not invest in now?
First, these are offices, industrial areas and working spaces.
Due to the pandemic, most of the people started working from home. Some employees have been reduced. Thus, the demand for offices has decreased to the minimum values. In the last month, signs of recovery have begun to appear, but no one dares to talk about a stable return to the old indicators. The cuts also affected industrial real estate, that is, the one that is used in light and heavy industry, as well as working spaces, which is usually coexist with such areas.
The Emirates has never had a large industrial economy. When the coronavirus appeared, this sector has decreased even more. The demand and prices have fallen. The reduced employees have decreased the demand for working spaces.
The only economy sector that still uses such real estate is the development sector. However, this is not enough for sufficient and stable earnings.
You will not be able to make money by renting compact apartments. It is important to mention a sharp increase in demand for the purchase of ready-to-move-in real estate among people, who want to buy more spacious real estate, adapted for both life and work. In addition, an affordable mortgage only expands the possibilities for those who would not dare to buy real estate.
Thus, storage and sorting spaces, trade and exhibition areas, as well as studios and hotels are used for rent to earn money.
The demand of storage and sorting spaces began to grow rapidly in 2020 during the pandemic. Suddenly, the e-commerce sector began to cover a huge share of the economy, services and retail. The need for spacious areas for storing goods, as well as spaces where all this will be properly sorted, packed and sent to the addressees, has sharply increased. In 2021 the price increase for this category was 60%. The return on investment is 8-10%.
Retail and exhibition spaces has begun to grow in the past few months, driven by the upcoming Expo-2020. Lots of large and small companies with the influx of tourists, employees and business representatives, strive to buy such real estate as soon as possible so that all millions of people who have arrived will have a place to buy the necessary or desired goods.
If retail stays stable after the Expo, the sector will grow by 111 % in the next 5 years.
Studios are always in demand, as every year a huge number of tourists, residents and seasonal employees arrive in the Emirates. The real estate availability is more important them than its luxury or prestige.
Due to the world exhibition, hotels and studios should grow at an extremely high rate from month to month. It makes sense to buy such a property.
Real estate for big, but short-term earnings, i.e. flipping
Villas, townhouses, penthouses, medium-sized and spacious apartments are more suitable for flipping, i.e. buying real estate for the resale.
The situation with luxury real estate is difficult. It is necessary to note one key point. Nowadays, it is growing very quickly. The forecast of this dynamics is quite long.
However, you need to remember two things:
- This sector has been decreasing for years. It is extremely high risk to bet on it based on the results of a few record months that no one could have predicted.
- Luxury real estate is acquired by an extremely small number of investors and expats. It is quite unstable even at the best of times. There are lots of proposals. The interest is variable. Indeed, many investors have got back or come to the UAE, especially to Dubai. However, no one can guarantee that by the end of the year they will not leave the country in search of more profitable markets.
It is the long-term decrease, interrupted by an unpredictable and sudden growth, that makes us say that luxury real estate is not the best choice for investment.
Too low prices, which are the result of many years of cheapening, as well as a sudden, but difficult to predict growth, are too big cons for the property, which you can pay millions or even tens of millions of dollars.
It is better to concentrate on three other areas: family and medium-sized villas, townhouses and apartments.
As we mentioned above, it is cheaper. It is in demand among visiting families and employees, who try to turn their housing into a home office. An affordable mortgage makes it possible for the general public to buy this property.
You can be sure that after buying a property, you will be able to turn it into a profit in the next few months.
The apartment prices rise by 2.5 - 3% per month. Since the beginning of the year, it has increased by 12.22%.
The prices for villas and townhouses are growing by 2.5 - 3.5% per month. Since the beginning of the year, it has been 14.27%.
For comparison, luxury real estate increased by 13%, but the growth happened in June-July 2021. No one expected such a sudden change in trend.
Conclusion
If you decide to become a resident of the United Arab Emirates, then the best choice for you would be to buy medium and compact villas, family houses, townhouses and large apartments.
If you are a wealthy person, then perhaps your choice is expensive villas and penthouses. According to the prices, it will be one of the most important purchases in your life.
If you want to stay in the Emirates, for example, as a tourist, traveler, or you just prefer to spend a vacation there from time to time, then your choice is studio rentals, hotels, compact and medium-sized apartments.
If you are a visiting specialist, then you should start by looking for a good and spacious studio for rent.
If you are an investor and you are looking for a way to earn money, then you should choose residential or commercial real estate.
It is easier to become an owner of residential real estate. You will start to earn money quite fast, but the property vacancy rate is high and you will never know how good the renter will be. On the other hand, flipping is a risky business due to the seasonality.
To become the owner of commercial real estate is more difficult, but you can make more money and rentals are always long-term.
Among buy-to-let options, the best choice is studios, hotels and compact apartments. Talking about commercial real estate, you should pay attention to the following:
- Storage and sorting spaces that are popular with companies engaged in e-commerce.
- Shopping and exhibition halls are in demand among retailers, who are striving to return to the market on the eve of Expo-2020 in Dubai.
If you are looking for real estate to earn money on resale, then villas, townhouses and medium-sized apartments.
Luxury real estate is an opportunity for earning money, but it is quite risky, as the increase of demand and prices is difficult to predict.
