Is It a Good Idea to Invest in the UAE Real Estate During the Uncertainty Period?

A crisis can be a time of opportunity for those who know how to manage investments correctly.

Regarding the United Arab Emirates, especially in the context of the real estate market, it is worth noting the skillful actions of the country's government during the pandemic. Thanks to this skill, the UAE market not only endured the consequences of covid but also managed to significantly exceed the previous year’s performance. So the decision to purchase a property in Dubai can be a good long-term investment option and will help you to save and increase your capital.

Content:

• Past Years’ Figures and Current Situation in the UAE Real Estate Market
• At the New Cycle’s Start
• How to Benefit if Purchasing Real Estate During Crisis
• Do the Risks Worth Taking?

Past Years’ Figures and Current Situation in the UAE Real Estate Market

In 2020, under the influence of the COV-19 pandemic, the UAE's GDP decreased from 8.5% to 6% amid a decrease in exports. In the Dubai residential real estate market, the economic crisis in the country caused a decrease in the average cost of villas and apartments by 2% in the first months of the pandemic and 9.7% from April 2018 to April 2019.

The volume of sales in the market also decreased. In March 2020, compared to March 2019, the decline was a record 42%. Villas and apartments in Dubai lost 12% in sales during the 1st quarter of 2020 in comparison to the same period in 2019.

At the New Cycle’s Start

In mid-2021, the UAE economy began to head towards recovery. The real estate market began to grow. In total, 84,196 transactions were registered in Dubai in 2021, totaling $41.13 billion. This figure is a record for the last 12 years. The total number of purchase-and-sale transactions in the Dubai real estate market in 2021 was the highest since 2013.

2021 in numbers:

• 59.6% of all properties sold were finished properties;
• 40.4% were transactions with under-construction real estate (off-plan properties);
• the total increase in sales compared to 2020 was 74.77%;
• the total value of transactions increased by 110.19%;
• compared to 2019 (pre-pandemic), 2021 (post-pandemic) sales increased by 55.47%.

In April 2022, the volume of transactions was 43% higher than in 2021 of the same period, and totaled 6342 transactions. Analysts predict an increase in UAE GDP of 3.5% by the end of the year. In 2021, this figure was 2.2%.

How to Benefit if Purchasing Real Estate During Crisis

The experience of the UAE and Dubai in particular is unique. It would be incorrect to expect the same from other countries that differ in political conditions and economies. At present, the real estate market in the emirates attracts buyers for several reasons. The reasons include recent government innovations aimed at supporting foreigners and attracting capital from abroad. These are some of them:

• the opportunity to start a business with 100% ownership in the UAE without the involvement of a sponsor or an intermediary;
• the opportunity to obtain a renewable resident visa for 3 years when purchasing a real estate unit worth AED 750,000 or more ($204,100; ¥1,300,000) instead of AED 1,000,000 ($272,200; ¥1,800,000);
• the opportunity to obtain a 10-year resident visa when purchasing a property worth AED 2,000,000 or more ($544,500; ¥3,600,000) instead of AED 10,000,000 ($2,700,000; ¥18,300,000);
• the ratio of a loan to the property cost (LTV) increased by 5%;
• the minimum threshold for a mortgage deposit for foreigners is 20% instead of 25% and 15% instead of 20% for UAE citizens;
• the possibility to take a mortgage for up to 80% of the property cost for properties costing less than AED 5,000,000 ($1,360,000; ¥9,130,000), and up to 70% of the property cost for properties costing more than AED 5,000,000;
• introduction of new 5-year "green" visas for foreign freelancers;
• the possibility to take out a mortgage for the purchase of an off-plan property (under-construction property) in the amount of up to 55% of the property’s value.

All these new rules benefit investors interested in long-term relations with the emirates. It is important for investors of real estate to feel they are on solid ground. At a time of instability in the world, the rational actions of the UAE government enable such an opportunity.

Do the Risks Worth Taking?

Thanks to comprehensive measures to support the market, housing, and rent prices in the 2 leading emirates, Abu Dhabi and Dubai, are steadily rising. In May 2022, the cost of housing in Dubai increased by 0.74%. Rental rates in some areas of Dubai have increased by 25% since the beginning of the year. The average yield of properties has reached 6% per year. Today, investors can try their hand at the Emirates housing market with relatively insignificant risks.

Europeans have become an indicator of the increase in foreigners’ activity in the UAE real estate market. During the 1st quarter of 2022, European citizens ranked 5th in the list of foreign buyers in the emirates. This number increased by 67% compared to the same period in 2021. This is the first notable growth recorded since pre-Covid. At the time of writing this report, complete data on the number of foreign buyers and the number of transactions made are not yet available. However, according to preliminary information, it can be concluded that there is an unprecedented increase in the interest of European buyers in the construction sector of the UAE.

If you are considering purchasing a property in Dubai, but don't know where to begin, please feel free to contact us! Emirates. Estate experts are always available to answer any questions related to purchasing a property and moving to the UAE. Our website presents fresh on-sale offers of off-plan apartments in upcoming developments in Dubai and other emirates, as well as the actual prices in several currencies.