Dubai attracts investors from all over the world: the cost of real estate is increasing, but demand is not decreasing. That’s why it’s very interesting to know: isn’t it too late to invest in Dubai apartments? Or maybe we are witnessing a bubble that is about to burst? The owner of the Address Property agency in Dubai, Alexey Slauta, told REALTING in an interview about all the changes in the property market in this city and shared the secrets of successful investments.

«Dubai’s property market is dependent on external factors»

Dubai’s real estate market continues to grow rapidly. Property in Dubai is currently available for $2,910 per sqm on average. During October 2022 the prices in the emirate soared by 1.8%, and in 2022 flat prices rose by 8.5%, and the prices for villas grew by 13%. 

In this case, the biggest buyers of real estate in the UAE in the third quarter of 2022 were the Russians. Next in the ranking are buyers from Britain, India, Germany, and France.

The owner of the real estate agency Address Property in Dubai Alexey Slauta is sure that in the nearest future, the market slowdown should not be expected.

the man smiles— What has changed in Dubai’s property market over the past few months?

— Dubai’s property market has hardly changed in the last few months: housing prices are still rising, demand for property from Russians is increasing and the government is investing a huge amount of money in the development of the region. More and more people are asking to find a flat within a relatively small budget (around $150,000 — $200,000) for their personal residence. And to me, it is absolutely no surprise that people are choosing Dubai to move to.

Of all the locations, Dubai is the most expensive, but the most promising. For example, it is much easier to do all the paperwork, find a job, and start a new business here. If Asian or Turkish markets are mostly oriented toward locals, Dubai was originally a city of expats (out of the 3.5 million population only 250,000 are locals). Everyone here is a newcomer, so communication is on an equal level and a very comfortable business environment is created. In this regard the situation is very similar to America — everyone also went there once, and the attitude to each other is the same. This is a striking difference compared to Europe, where immigrants often feel like strangers.

However, there are some difficulties that have recently emerged. For example, the simplest residence visa based on the purchase of real estate is now issued only for 2 years (previously it was for 3 years), also there are problems with opening a bank account on the basis of such a visa. At the same time, if you have a work visa, there will be no problems with opening a bank account.

The good news is that at the end of last year, the government announced a new program for job creation. It is planned that the total investment in the program will be $17 billion and this, again, will help to attract people to Dubai. In addition, the government is also attracting IT professionals by offering them certain bonuses and benefits. 

Don’t forget a zero tax rate on income (i.e. there is no tax to be paid on wages, profits, or any other income). This attracts a huge number of people to the country.

In addition, the UAE is a wealthy, fast-growing country with a market and great business opportunities and niches for development. There is the Dubai Development Plan 2040, which implies that the city’s population will increase to 11 million people (2.5 times the population of the city today). It sounds unrealistic, but not more unrealistic than all previous UAE projects that have already come to life.

— More and more people say that Dubai’s property market is like a bubble that is about to burst. Is this true from your point of view?

— I have heard this kind of talk too, and it’s been like this for a number of years. Everyone is waiting for the market to start adjusting in the direction of lower demand and, consequently, lower prices, and for the so-called ’bubble’ to burst. But in the end, we are seeing significant growth. 

The thing to understand here is that Dubai’s market is almost entirely dependent on external factors. This means that there is no internal market — about 70% of real estate is bought by people who do not live and do not intend to live in Dubai. Only 30% of the market is people who live in Dubai, the rest in real estate is an investment. So it is always very difficult to predict how the situation will develop further. New laws can come into force anywhere — in the Arab countries, India, Russia, or Europe — and this can stimulate or weaken demand for real estate in Dubai.

But over the next six months to a year, we can predict that demand will remain strong. The main prerequisite is the number of new large-scale projects that developers are still planning to bring to the market. In Dubai, each big construction company has a staff of analysts who calculate the profitability of this or that project, and if they announce a project for 4-6 high-rise buildings, it means that it will be profitable for them to sell these houses. And it takes from three months to six months for a project to come out. If the market goes down, the developers’ behavior will change dramatically.

Another important factor is the increase in demand for rental accommodation. This has been followed by a rise in rental prices (about 30%). As a result, we can see that now it is very difficult to rent a good flat or house in Dubai due to a catastrophic shortage of offers. It is possible to choose a flat but to find a villa is almost impossible because everything is occupied. There is such a huge flow of people coming to Dubai that there is even a shortage of ready-made apartments on the rental market. 

In addition, there is official data called the Bubble index (from companies UBS Knight Frank). In October 2022 Dubai (one of the few, by the way) is in the green zone with a score of 0.16. By experience, even if the property market ends up in the yellow zone, it does not mean that housing prices will fall drastically. 

The situation can change quickly, however, and it would be impossible to make accurate predictions. However, in my view, there will be growth or stability in the Dubai property market over the next year. 

A view of Dubai

«If you want a quick investment, it’s not too late»

— Has the minimum entry threshold for a buyer changed in the Dubai property market?

— When it comes to investment, the minimum entry threshold has remained at $250,000. This is because only properties in tourist locations or in the city center can be regarded as truly investment properties. It is this kind of property that is more in demand and therefore will bring in more rental income or resale income.

In projects under construction, you can enter with a smaller amount from $70,000 to $100,000. If they are new projects which have just come onto the market then the property could be sold within six months. In that case, the price increase would be about 5-7% but given that there is no need to pay the full amount, the investor’s return on investment would be about 15%. If the investor goes out after a year, he can get a 20-30% return on investment.

If we’re talking about buying for yourself, for long-term rental, or to preserve (rather than increase) the funds, we can also talk about a minimum entry threshold of $100,000 for the entire flat. You can find a studio for $50,000 but it will be in an area where Arabs or Indians live and you won’t get an adequate rental return. And here, prices are not going up, they are even going down.

— Is it too late to invest, given such high property prices in Dubai?

— It all depends on what you want to get. It is not too late if you want a quick investment, i.e. to invest in a project under construction and get out in six months. However, if you want to invest for 2-3 years, there is a risk that the market will change within that period. If we are talking about a long-term investment, where you buy a flat in a good area and rent it out for about 7-10 years, this is probably one of the very good options for saving and increasing your own funds. Today you can find a flat where the total annual rental income is around 10% — there are no such rates anywhere else. But even if prices fall in a few years, your income will fall to 5-7%, which is also very good. 

In investing, much depends on the area in which the property is located. The best long-term investment is, of course, the tourist areas because even if something in the world changes again, people will still go on holiday to Dubai. Tourist traffic is now growing at around 30% a year. 

But even the area is not the only factor to consider. An investor must take into account the reputation of the developer, the features of the project, the location, the infrastructure, and the cost of maintenance. It would seem that such a small thing as an air conditioner and its connection can cost an investor an «extra» $120 per month, and the gas subscription fee is another $20 per month. These are the little things that make up an investor’s profit. Of course, it is impossible to know about all the nuances if you don’t live in Dubai — that is what a competent estate agent is needed for.