Real Estate Investment is always risky. The market can be great for many years, and your investment pays off. However, when a real estate downturn comes, you may be lucky to tread water or save your investment.
Any type of investing in another country is not easy. There are different rules to follow, different attitudes and cultural practices, as well as different currencies.
You need to know what you are doing to avoid many of the risks that are involved, especially when you are investing in Dubai. Keep reading, as we will give the bad news first, then the good news.
There will always be risks, no matter which country you invest in. This includes the real estate sector, as that can be a volatile market. Perceptions change, and with those changes, investors move on to more secure places to invest.
That can be bad for the real estate market, and values drop. Here are some risks to watch out for:
1. Real Estate Value- The balloon can only get so big before it is popped. This can happen in any real estate market, including the growing Dubai sector. You need to buy wisely to guard against dropping real estate values.
2. Fees- In Dubai, you will have to pay additional fees on top of the purchase price and at the time of closing. There is the 4% Dubai Land Development fee. This is an amount based on the property value.
Then if you go for a mortgage in the country, you will have to be a 0.25% mortgage registration fee along with any administration fees.
3. Rental Yields- Are not very high when you are buying an apartment or office space in downtown Dubai. The yield is only 7% which is better than London, Paris, or New York but not always that great when you factor in expenses.
Outside of downtown, your rental yields may go up to 12% depending on which neighbourhood you invest in. Apartments provide greater yields at 12%.
4. A Low Market- The bigger apartments may be wonderful and look like a good investment; however, there are not a lot of potential tenants that can afford the high rental costs.
You may suffer from high vacancy rates if you price yourself out of the current market.
The positive aspects of investing in Dubai outshine those risks and may help you avoid most of them. Here are some benefits that you will get:
1. Large Luxury Apartments Are Available- There is a good supply of these, and if you pick the right location, these promise to provide a better ROI than other apartments and villas you can buy.
2. Luxury Homes Are Affordable- Dubai has probably the best selection of luxury homes at affordable prices over other major cities around the world.
You can still buy low and possibly sell high when the time comes. Your ROI on these homes looks good as well.
3. Lots Of Competition- There are what are called off-plan properties, and these developments compete with each other to get buyers for their homes. This is a good way to lower your costs while still securing a great home in a great location.
4. Freehold Areas- Dubai has set aside some property developments for international investors. You can get a variety of home designs, including villas, townhouses, and apartments.
5. Consistent Development- Dubai continues to construct office buildings, malls, and other projects that help raise property values. Buying at the right time will help you see an almost immediate higher-than-expected ROI.
6. Property Investment Visa- Probably the best benefit for international investors. Once an investor buys property in Dubai, they become eligible for long-term residency visas.
This will help you manage your properties better as well as keep your finger on the pulse of the investment community.
7. Advanced Technology- Once you buy in Dubai, you get access to all the Smart technology being implemented in the city
8. A Secure Environment- Dubai is considered one of the safest cities to live in. This fact is a good marketing strategy when you want to attract tenants or potential buyers of your investment properties.
1. Convenience In Doing Business
Dubai ranks very high when it comes to providing vital support to businesses. It is #1 in providing electricity, #2 in paying taxes, and #3 in getting construction permits. In other words, it is easy to do business in this emirate.
2. Dubai Still Has Excellent Economic Growth
This is a great situation to be involved in when you want to expand your business interests. No one wants to invest in an area where the economic growth is low or in the negative.
3. Stable Government
Dubai is a very stable country politically and has been since 1971. Unstable governments affect the economic growth towards the negative, but stable ones help the economic growth get better.
4. Flexible Tax Options
Always good news for investors. Plus, the fact that investors can own 100% of their property is enticing to anyone looking to expand their portfolio. These flexible policies help make life in Dubai a lot more interesting and freer.
5. Very Good Infrastructure
Dubai has made sure that it is a priority to have a top-quality infrastructure plan and development. The airport handles over 41 million people each year, and its port makes it easier to import or export products to the residents of the city.
To learn more about the risks and advantages of investing in Dubai, give our office a call. We have over 10 years of investment experience in this city and can help you navigate the ins and outs of making your own investments.
It pays to have experienced guides leading you through all the regulations and rules. That will help you make better investment decisions when you want to expand your portfolio to this international city.
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