Dubai property experts weigh the pros and cons of apartment investment as rents soar and the market nears a potential peak.
Dubai real estate: Are apartments worth investing in right now? Property experts weigh in.
Property investment in Dubai can generate approximately 7 per cent rental yield for long-term leasing and double-digit rental yield for short-term leasing. Image: Shutterstock
Dubai’s soaring rents are pushing residents towards homeownership, but is now the right time to buy?
As apartment prices climb alongside rental rates, potential buyers face a dilemma: invest now or wait for a market cooldown. Here is what experts told Arabian Business.
“In general, apartment prices in Dubai have been rising for the last 18 months but at a different pace, depending on location and desirability,” Haider Tuaima, Director and Head of Real Estate Research ValuStrat, said.
Map out your financial plan before investing in Dubai apartments, say experts
However, according to Jasim Naseer, Client Manager at Betterhomes Dubai’s property prices are “considerably lower compared to major global cities.”
“Dubai developers are enhancing future products to cater to end-user requirements, gradually increasing prices and making the real estate industry in Dubai highly competitive and lucrative for investment,” he said.
However, before investing in an apartment, both experts advised potential buyers to consider a few financial factors.
“Buyers must ensure that their cash inflows match the payment plan of the property they intend to buy, with the ability to cover at least 50 per cent of the payments and achieve 50 per cent of construction milestones,” Naseer said, adding that other considerations include proper registration of the project with the Dubai Land Department, confirmation of the project’s escrow account is active for fund transfers, verification of the payment plan to ensure that it is milestone-linked, and review of the developer’s profile and history.
ValuStrat’s Tuaima echoed the sentiment by adding that it is essential for property buyers to conduct a thorough check of market conditions first, as well as supply and demand in the area.
“If this is to be mortgaged, sufficient funds to cover the down payment, DLD fees, broker commission, and monthly repayments. Buyers need to also consider service charges and home insurance. Other factors relate to quality of the building and level of maintenance. If monthly repayments are higher than renting the same apartment, it may be wise not to buy at this time,” he said.
Buyers must ensure their cash inflows match the payment plan of the property they intend to buy
So, should investors wait before buying an apartment in Dubai?
“The Dubai property cycle is seemingly approaching its peak, generally buying at this time and selling in short to medium terms pose a higher risk of capital loss, unless, of course, the intention is to hold the property for the long term, an example of which would be owning and occupying the property,” Tuaima cautioned, adding that average net yields for apartments are at 5.6 per cent, ranging from 3.2 per cent to 7.5 per cent.
He also added that the city’s development plan, which forecasts population growth to 5.8 million by 2040, will further impact housing demand.
However, considering the extensive economic development across the region, investors should buy new real estate projects “now to achieve greater returns over time,” Betterhome’s Naseer argued.
“Delaying the purchase may incur higher costs, such as inflation and premiums, potentially resulting in lower returns,” he said, adding that “Dubai’s future mega-developments will continue to generate increased economic activity and attract more people, necessitating a greater supply of homes across the city.”
As for the process, Tuaima said buying an apartment in Dubai is “relatively easy once the decision of purchase is made.” “Usually, the broker would take the buyer through the simple steps and official documentation that need approval signature, most of which only require a smartphone to process,” he said.
“The Dubai Land Department regulates all property-related transactions, employing advanced IT systems to ensure efficient, secure, and transparent execution for all stakeholders in the real estate industry,” Naseer added.
Where are the best areas to buy apartments in Dubai right now?
Naseer pointed out beachfront developments across Dubai and Dubai South as areas with long-term growth potential.
“Property investment in Dubai can generate approximately 7 per cent rental yield for long-term leasing and double-digit rental yield for short-term leasing, making it attractive for new investors,” he said.
Tuaima, on the other hand, explained that the city’s property market is “shifting towards smaller, more affordable” properties.
“Apartments in Discovery Gardens, The Greens, The Views, Town Square, International City and Dubai Production City. These communities witnessed the highest annual capital gains for apartments in a decade as well as accelerated rental growth, resulting in potentially higher yields and an added attraction for investors,” he said.
Potential oversupply, government initiatives to drive demand for Dubai apartments
However, both experts mentioned factors that could influence future prices.
Tuaima cited potential oversupply, with 120,000 new residential units expected in five years, in addition to the mid-affordable apartment market “witnessing considerable growth.”
Buying an apartment in Dubai is relatively straightforward once the decision to purchase is made.
“Looking forward, areas with existing metro stations nearby as well as communities that would soon benefit from upcoming Dubai Metro blue line, may witness faster capital and rental appreciation at the current upswing stage of the market cycle, and may demonstrate resilience if and when the market enters a correction stage,” he said.
Naseer further referenced government development initiatives as drivers of demand.
“The UAE Government is undertaking extensive development initiatives and investing billions of dollars to achieve sustainable economic growth. This will create substantial demand in the Dubai property market and potentially drive prices higher,” he concluded.
For a detailed perspective on the property market, visit: Dubai - VPI Residential Capital Values - June 2024
