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Dubai real estate is one of the leading investment sectors not only in the UAE but also globally. This is attributed to a favourable economic climate, low taxes, and a comfortable business environment. The number of transactions with property in Dubai continues to rise, reaching a record 133,300 transactions totalling USD 112 billion in 2023. This represents a 37% increase in quantity and a 55% increase in value compared to the previous year.
In comparison to the European housing market, where purchasing power has declined since mid-2022 due to high interest rates and inflation, the UAE remains a safe haven for international business people. One of its primary rivals is the Hong Kong Special Administrative Region (HKSAR ), but it offers fewer advantages. In this article, we will explore real estate differences between Dubai and Hong Kong, comparing their economies, prices, additional expenses related to property acquisition, and tax systems.
Content:
- Market and economy
- Dubai and Hong Kong real estate: price comparison
- Real estate legislation differences
- Transaction specifics
- Rental income taxes
- Investment returns and rental rates
- Residency through property investment
- Conclusion
- Start your property search in Dubai with Emirates.Estate
Market and economy
Both cities are known for their thriving and stable economies. Both the Hong Kong dollar and the dirham are pegged to the US dollar, ensuring the stability of the local currency. Both metropolises feature low taxes, business-friendly environments, and free competitive markets.
However, the HKSAR’s economy lacks diversification, relying more heavily on trade and financial services. The emirate, on the other hand, places special emphasis on technology, innovation, and attracting skilled labour, aiming to reduce its dependence on oil.
In 2023, the emirate’s government introduced the 10-year economic development plan, D33, aimed at stimulating key sectors such as logistics, finance, manufacturing, and tourism. The HKSAR, in line with China’s 5-year plan, aims to become an international information technology hub.
Dubai and Hong Kong real estate: price comparison
Hong Kong housing prices are significantly higher than those in the UAE. For example, on average, you can buy a 105 m² apartment in Dubai for USD 980,000. In the Chinese metropolis, the same amount can only get you a 21 m² unit.
There are several reasons why Hong Kong real estate prices are high:
- High land price policy;
- High population density: 7.49 million people compared to 3.62 million in the emirate;
- Overall land scarcity;
- Pricing policies of construction companies.
Investors are inclined to choose Dubai; Hong Kong differences may be too great to overlook.
Real estate legislation differences
When choosing to invest in Hong Kong or Dubai, one should be mindful of the unique aspects of local legislation. In both cities, overseas nationals are allowed to buy property.
However, there is a significant difference. In the emirate, apartments and houses can be bought either as freehold (if located in freehold areas, the number of which is constantly increasing) or through a long-term leasehold. In Hong Kong, real estate is only available under leasehold.
Compared to Hong Kong, Dubai has a substantial advantage here since owners can use the property at their discretion. For instance, selling a freehold property does not require government consent, while in the Chinese metropolis, this is a mandatory prerequisite.
The UAE is open to citizens of all nationalities, while the HKSAR prohibits Afghans, Albanians, Cubans, North Koreans, and residents of mainland China from purchasing apartments and houses.
Transaction specifics
To buy real estate in Hong Kong and obtain a title deed, one must wait approximately 2 months from the agreement signing date. In the emirate, the entire process usually takes about 4 weeks. Although the purchase procedures in both cities are similar, the additional financial implications significantly differ.
In the HKSAR, foreigners are required to pay an ad valorem stamp duty (AVD) ranging from 4.25% to 7.5% and a buyer’s stamp duty (BSD) of 7.5%. If you sell the property within 36 months of purchase, the current owner also pays a special stamp duty (SSD), which can range from 10% to 20%. This is a crucial consideration for investors: while acquiring Hong Kong apartments and houses is feasible, relying on a resale strategy might not be advisable.
In the emirate, there is a one-time fee paid to the Land Department (DLD), amounting to 4% of the purchase value. This is the most substantial payment. Overall additional costs here are approximately 4.5% when buying on the primary market. On the secondary market, a 2% commission to the broker should be added. There are no penalties if you resell the property; in fact, it is one of the common investment approaches in the city. You can acquire a residence during the construction phase, sell it upon project handover, and earn profits of up to 30% of the initial amount.
Rental income taxes
In one of the UAE’s wealthiest emirates, landlords are not subjected to income tax, making it a highly attractive investment destination. In the HKSAR, the standard income tax rate is 15% of the assessed value minus a deduction of 20% for repairs and outgoings.
Let’s say, you choose Hong Kong, buy an apartment with 1 bedroom, and rent it out for USD 24,000 per year. You deduct USD 4,800 from this amount to cover expenses—that is, you pay 15% tax on USD 19,200. Your annual profit would then be USD 16,320.
Investment returns and rental rates
Dubai has one of the best ROIs in the world, with the average return ranging from 5 to 8% per annum for long-term rentals and from 11 to 13% for short-term rentals. Thus, you can anticipate a substantial income and a swift payback period. Renting a 1-bedroom apartment in the emirate cost between USD 1,000 and USD 2,000 per month, depending on the neighbourhood.
In the Chinese metropolis, flats yield an average of 2 to 4% per annum, resulting in lower rental returns compared to the emirate. The average monthly rent in the HKSAR ranges from USD 1,900 for properties in more remote locations to USD 2,500 and above for more attractive options.
Residency through property investment
Dubai offers a 2-year visa to anyone investing in real estate starting from USD 204,000. With investments exceeding USD 544,500, investors can secure a 5-year Golden Visa. Both visas allow you to sponsor spouses and children, and the Golden Visa additionally covers domestic staff. There are virtually no restrictions: one can purchase both residential and commercial properties, one or multiple units, whether under construction or completed, using personal funds or taking out a mortgage. The crucial condition is that the minimum required amount must be paid from personal finances.
Since 2023, the HKSAR has temporarily suspended its residency by real estate investment programme, preventing the acquisition of an investor visa through residential property purchases. However, affluent individuals investing over USD 3.85 million in non-residential real estate can apply for permanent residency under the following conditions:
- The applicant has maintained the investment for a minimum of 7 years;
- The applicant has had net assets of at least USD 3.85 million for the 2 years preceding the date of application.
Conclusion
Dubai stands out as one of the most appealing global investment hubs, offering a wide range of freehold properties, high profitability, and no income tax. One of the emirate’s major benefits is the programme allowing real estate investors to secure a visa. In contrast, Hong Kong is characterised by comparatively high taxes and lower returns, making it a less favourable investment option.
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