Every investor should focus on diversifying their portfolio.
A diverse portfolio can be achieved in various ways, but combining a variation of property types in different locations will help secure your assets and protect you against market fluctuations.
The Dubai property market is designed to attract overseas investors. It offers bright, vibrant and varied neighbourhoods, favourable tax incentives, and even the opportunity for investors to become residents.
The implications surrounding Brexit have made European investing slightly more tricky for the UK investor, meaning many individuals are turning their attention to the middle east. Here’s a deep dive into why Dubai is an excellent property option for the UK investor.
The Facts and Figures
As you may be aware, the United Arab Emirates comprises seven emirates, covering 83,600 square kilometres and housing just under 10 million people from all around the globe. Dubai City is the capital of the Emirate of Dubai, which is one of the wealthiest of the seven mentioned.
3.3 million people call Dubai city their home, with the opulent living conditions attracting some of the world’s richest. The mixture of ethnicities, religions and cultures has created an exciting melting pot where everyone feels at home and expects to find a property to match their desires and budget.
The Dubai Dream
In 2019, before the coronavirus pandemic, Dubai welcomed 16.7 million tourists. Attractions such as the Burj Khalifa and the three incredible artificial palm islands draw visitors from far and wide.
Those with deep pockets enjoy indulging their lavish lifestyle here, but the city is popular with families from all walks of life. As a result, many businesses have built bases in Dubai, bringing with them eager staff looking to secure long term rental contracts.
The diversification opportunities in Dubai are tremendous.
First and most obviously, the option to purchase long term residential lets. UK investors tend to opt for the more lucrative, off-plan apartments, which can be handled in a completely ‘hands-off’ fashion and range from small studios to extravagant four-bedroomed spaces fit for a large family.
However, short term rentals are also extremely popular in Dubai. Many people travel to the city for work and prefer to opt for something a little more homely than a hotel, presenting the opportunity for you to rent your property for three to six months at a time. Although this requires a little more administration, the payoff can be astounding.
Finally, for those looking to break into the commercial property sector, the options in the UAE are massive. Having a base in Dubai is the stamp of approval for all modern businesses – from banks to software companies to boutique clothing stores. In addition, companies tend to take rental leases for much longer than the average residential tenant, meaning once the contract is signed, your investment will look after itself.
Residency Visas for Property Owners
Many UK residents diversify their portfolios in Dubai due to the lucrative opportunities and the option to become a resident of the United Arab Emirates. Investors become eligible to apply for a 3, 5 or 10-year visa depending on the value of the property they invest in.
Notably, these visa options are only available for those purchasing property in an individual capacity. Purchasing as a corporation does not present the same visa opportunities.
Favourable Tax Conditions
All UK property investors will be familiar with income tax, capital gains tax, inheritance tax and stamp duty land tax. These four crucial payments will ultimately affect how each investor handles their portfolio and at which point they decide to liquidise. These taxes are non-existent in Dubai, where a 4% one-time property tax is instead payable upon purchase. Incredibly, this is split evenly between buyer and seller, meaning as an investor, you will only be subject to a 2% tax upon purchase.
It should be noted that there may be one-off and ongoing fees associated with purchasing in some gated developments. Your dedicated property investment company will partner you with any relevant legal assistance you require during this period.
Choosing the Perfect Dubai Location
Don’t be fooled into thinking that every Dubai investment is equal. Dubai covers a whopping 4114 square kilometres, meaning it has an area to suit every taste and family dynamic. Here are three of the most popular spots in Dubai for both ex-pat investors and local property lovers.
Dubai Marina has long since been considered the most exciting area for Dubai real estate investment. The area combines an eclectic mix of residential properties, luxury hotels, buzzing retail spaces and world-beating restaurants.
The marina is a fashionable vacation location, offering the vibrancy individuals expect from a Dubai holiday, alongside easy access to the miles of golden sands. With incredibly high demand and an average residential sale price of 1,100,000AED (£220,000), the marina offers lucrative rental yields for those with modest budgets dreaming of a second home in the United Arab Emirates.
Many consider downtown Dubai to be the epicentre of the city. The area is packed with incredible hotels, fine dining restaurants and some of the best schools in the world. As a result, most tenants looking for a home in Dubai will consider this area.
Those living in downtown Dubai have the Burj Khalifa and the Dubai Mall on their doorstep and the incredible Jumeirah beach just a ten-minute drive away. The average sale price in downtown Dubai is 1,230,992 AED (£246,000), with average gross yields of 5.8%.
Situated close to the magnificent palm, Barsha Heights (formerly known as Tecom) is fast becoming one of the most sought-after locations in Dubai. Barsha Heights succeeds in elegantly blending residential and commercial premises, building a tight community of business owners, ex-pats, and locals.
Barsha Heights offers a lucrative option for UK investors, with rental yields of 6.5% available and an average property price of 693,121 AED (£138,000). This unique location presents an excellent opportunity for those with a passion for commercial property. Many businesses are eager to make their stamp in Dubai, willing to pay premium rental prices for unique locations.
Facilities to Boost Your Rental Yield
Luxury is the first word that springs to mind when most consider Dubai. The area exudes elegance, sophistication, and class. Meaning, residents expect a high calibre of rental property, and they are willing to pay a premium for it.
Aside from excellent location, tenants are searching for a range of facilities to enable them to live the life they have become accustomed to. Anyone lucky enough to visit Dubai will be well aware of the importance of secure parking. Dubai is a complex city to navigate, the vast spans of land and blazing sun make walking difficult, meaning a car is necessary for almost every resident. Secure underground parking will elevate your property, appealing to the broadest range of tenants.
Unlike many apartment blocks in the UK, Dubai homes are regularly filled with state of the art gyms, hipster coffee shops, and boutique restaurants. So naturally, residents are willing to pay a premium for this accessibility. Although the asking price for a property may be significantly higher, you will be sure to reap the rewards in the annual rental yield.
Dubai Investment Recap
- Dubai is a varied and exciting city, but all investments should not be considered equal. The most popular locations include the Dubai Marina and Downtown Dubai, which both appeal to young professionals.
- The city presents an excellent opportunity for UK investors to diversify their income, building a robust portfolio that is strong against fluctuating markets.
- There are many tax incentives to purchasing a home in Dubai, and investors may even be presented with the opportunity to become a resident in the United Arab Emirates.
- Tenants in the city have incredibly high expectations from their rental property. Therefore, opting for a home with amenities such as secure parking and quality fixtures and fittings will help attract genuine tenants with longevity.