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In 2023, the real estate sector in the United Arab Emirates is full of surprises—mostly pleasant ones. The market of real estate in Dubai is currently showing record growth with the prospect of an even greater rise before the end of the year.
How can you make a profitable purchase under such conditions? Just do what you always do: seize the moment when demand dwindles for one reason or another.
Content:
- Favourable summer
- Which segments remain active?
- Ramadan and the real estate market
- What is the benefit of the holiday?
- How not to miss the opportunity?
- What to do after purchase?
- Moderate strategy examples
Favourable summer
Due to the hot climate, the tourist season in the UAE lasts from December to March, when the air temperature is around 25–30 °C. During the summer months, the temperature can rise to 45 °C and even 50 °C. As a result, there are fewer tourists in the country from June to August—after all, not everyone can endure such heat. Moreover, many foreigners permanently residing in the UAE prefer to wait out the heat somewhere abroad.
The outflow of the population causes a lull in the real estate market. Only by mid-September does the market return to previous figures. Even developers in Dubai never announce new projects in the summer, withholding all new residential developments until September. However, it is at this time that developers seek to reduce the number of unsold properties (since time is money in the development industry). Therefore, in the summer months, most of the units are sold at a discount.
Due to the outflow of the population and the lack of new projects, the demand for real estate is always lower than at other times of the year. For this reason, in past years, real estate prices would drop in the summer. In 2023, due to the rapid growth of the market, prices are rising even now, at the beginning of summer... however, not as fast as they will do in the autumn.
Which segments remain active?
It is in the summer that overseas families with children most often move to Dubai since children are having summer holidays. Because of this, the villa and townhouse segment remains active in the summer, even if demand is somewhat lower. You should keep this in mind if you plan to buy a large home for the whole family.
Here’s another important point: thanks to the influx of migrant families in the summer, the demand for rental properties doesn’t go anywhere. After all, many of them prefer to rent a villa rather than buy one. This is important to bear in mind for those who want to invest in real estate. Having profitably bought a villa or townhouse at a discount in the summer, you can immediately find tenants and start receiving passive income.
There are other, less significant advantages as well. For example, city roads are much less busy in summer. As a result, you can view more properties in a day. Besides, reduced demand decreases the likelihood of someone else buying the option, which is right for you.
Ramadan and the real estate market
Another quiet period is the Islamic month of Ramadan, which falls in March and April. At this time, Muslims first practise a 30-day fast and then celebrate Eid al-Fitr, the second most important holiday in Islam. During the festive days, there is a lull in a wide variety of business activities including real estate transactions.
In 2023, Ramadan ran from March 22 to April 20. Analysts initially thought this year would be an exception: in the first 20 days of the fast, 2,222 real estate transactions took place in Dubai alone, up 50% on the same period last year. It was suggested that non-Islamic migrants were the cause, hence the sudden activity during the usual downturn.
Then came May 2023 and it became clear: no, Ramadan is still a quiet period. It was Dubai’s market who moved to a completely different level as far as growth rate is concerned. During May, it broke sales records for the previous months and for the same period last year. Moreover, in May, prices for expensive villas in Dubai and apartments in prestigious neighbourhoods surpassed the peaks of 2014.
What is the benefit of the holiday?
If in the summer developers prefer not to announce anything, then in the spring the situation is completely different. Sometimes large companies launch new projects shortly before the start of the holiday fast. For example, at the end of April 2019, Emaar launched three off-plan luxury real estate projects at once, given that Ramadan in 2019 began on May 5.
During the 30-day fast, there are more and more promotions allowing you to buy apartments at a discount. If the buyer plans to take out a mortgage, then it is worth considering that during Ramadan, banks have great offers in honour of the holiday.
As for the secondary market, lower demand can help negotiate a better price with the owner. Due to the large number of days off and reduced working days, it is much easier to arrange property viewings.
How not to miss the opportunity?
It is easy to guess that both summer and holiday discounts are ideal for buying a property cheaper. Ramadan is already behind us this year. However, another potentially profitable period is in full swing.
Sometimes, in order not to miss a good deal, you have to act instantly. In this regard, online real estate transactions will be a good tool. They started to pick up popularity in 2020 during the pandemic. In just a year and a half, their number in the UAE has increased by 200% and continues to grow.
Online transactions do more than just save time. When buying online, the client immediately receives a large amount of information about the property and can make a more informed decision. Sometimes some great deals can only be found on real estate portals and nowhere else. The main thing is to choose a portal with a large property database and experienced specialists.
What to do after purchase?
Assume that a bargain purchase has taken place. How exactly to dispose of the asset in order to make profit? Experts commonly identify three possible strategies: passive, moderate, and aggressive. The first one is less risky but requires patience. The second one is the most profitable, provided you choose the right property. The last one can quickly bring high income but is not without a fair amount of risk.
So, a moderate strategy involves owning a property for two to four years. If you buy an apartment at the presale stage (and at a discount at that), you can resell it two years after the completion of the project—with an appreciation return of 14% per annum.
If you also want to earn on rent, you can try the four-year option. Then the appreciation return will be from 32% over four years, and rent will bring about 7.5% per annum, provided you rent the property out long-term.
With a passive strategy, you can get an appreciation return of up to 45% over five years and earn up to 8.25% per annum on rent. However, in this case you need to rent an apartment out short-term more frequently so that it generates more income.
Finally, we move on to an aggressive strategy. It is designed for a total of six or 12 months. If you sell an apartment six months after the purchase in an off-plan project, you can get a profit of 50%. If you sell it in 12 months, you can count on 25–30% depending on the property. Why is this method considered risky? First, with aggressive investments, you will have to get an instalment plan to use a minimum of your own funds. Second, in order for the sale to bring as much profit as possible, it is necessary that the residential development is in demand and the developer has already sold all similar apartments—only then can the property be sold for more than the average market price. These factors are precisely the risk component. However, getting a professional to select the right property and hiring a consultant will help you reduce these risks.
Moderate strategy examples
As already mentioned, a moderate strategy is considered the most profitable. Below is a table that describes a couple of examples of such investments.
| Property Type | Ownership Period | Sale Profit | Rental Yield |
|---|---|---|---|
| Studio | 36 months | 47% over the entire term | from 5.5% per annum |
| One-bedroom apartment | 36 months | 48% over the entire term | from 6.5% per annum |
In both cases, an apartment must be bought either at a discount or at the very beginning of the project, at the presale stage. You do not need to pay the entire amount at once, an instalment plan with a 20% down payment is sufficient. Once the residential development is completed, the apartment remains with the investor for a year and is rented out. Then comes the sale.
Does such a moderate investment involve any risk? It does, but only when it comes to a possible change in market growth. However, experts unanimously predict Dubai to have an even greater rise, at least in the off-plan segment (the new-build market may slow down).
It is possible that the summer of 2023 will be an excellent opportunity for potential investors to start making money on the promising Dubai real estate market.
