Dynamics of rent prices and growth in 2022-2023

Despite the rather unstable situation in the world, the Dubai real estate market is showing active growth in 2023.

Next, we’ll talk about the most global changes in the cost of properties under construction and finished projects, and also discuss the prospects for investing in apartments located in this emirate.

Return on investment in real estate under construction

Last year, 2022, was the most ambitious in terms of the positive dynamics of transactions involving projects under construction, as well as real estate in the primary and secondary markets.

According to the government press service Dubai Media Office, in 2022 the total value of real estate transactions exceeded AED 500 billion (USD 136 billion) for the first time. Such a high demand for housing is associated not only with the simple procedure of purchasing an apartment.

Investors are primarily attracted by the opportunity to obtain a Golden Visa - a document granting the right to legally reside in the UAE for 10 years.

The most attractive investment option is the purchase of real estate under construction. The popularity of such deals is due to several factors:
the cost of off-plan residential premises is 15-20% lower than the cost of objects that have already been put into operation;
the most convenient payment plan from a financial point of view (most often, developers offer payment in the 40/60 format, where the investor makes 10% of the cost of the project as a down payment, the remaining 30% is paid during the entire construction period, and 60% is paid after the project is delivered to operation);
high profitability from the subsequent sale and rental of the acquired residence.
There is one important clarification: when purchasing apartments, the investor must pay 4% to the land committee. Accordingly, he needs to make 14% of the total cost of the purchased property as a down payment.

Investing in properties under construction is an ideal option for those who want to make money on subsequent sales. On average, off-plan property owners earn from such transactions from 15 to 25% of the original cost of the residence.

Intensity of price growth for primary market objects

Since January of this year, the cost of primary market objects has increased by an average of 4.1%. If we take May 2022 as the initial starting point, then the cost of premium category residences increased by an average of 11.3%. The most intense price growth is observed in Jumeirah Islands (20.7%), Emirates Hills (19.7%) and Palm Jumeirah (17.3%).

Flipping is another way to increase investment capital. The essence of such transactions comes down to investing in real estate under construction for the purpose of quick resale. Money is usually returned within 6-12 months.

Using flipping, the investor gets the opportunity to sell unfinished apartments after paying 30-40% of its cost. Due to the fact that the vast majority of developers provide buyers with an interest-free payment plan, the investor's income on average can reach from 70 to 100% of the cost of a residential property.

Benefits of renting apartments

Renting is a long-term format for increasing investment capital. Profit depends on the category of the property, its location and the amenities of the area in which it was built.

The most popular apartments among tenants are 1 and 2 bedroom apartments. Let's consider the average level of income from the delivery of such objects by region:

• Madinat Jumeirah the cost of an annual one-bedroom apartment is AED 135 thousand (USD 36.7 thousand), the cost of an annual rental of a two-bedroom apartment is AED 250 thousand (USD 68 thousand), the average rental income is 7.6% per year;
• Blue waters: the cost of an annual one-bedroom apartment is AED 315 thousand (USD 85.7 thousand), the cost of an annual rental of a two-bedroom apartment is AED 500 thousand (USD 136 thousand), the average rental income is 8.5% per year;
• Business Bay: the cost of an annual one-bedroom apartment is AED 92 thousand (USD 25 thousand), the cost of an annual rental of a two-bedroom apartment is AED 150 thousand (USD 40.8 thousand), the average rental income is 5.6% per year;
• Palm Jumeirah: the cost of an annual one-bedroom apartment is AED 183.7 thousand (USD 50 thousand), the cost of an annual rental of a two-bedroom apartment is AED 255 thousand (USD 69.4 thousand), the average rental income is 5.1% per year.

The annual income from renting an apartment in Dubai varies from 5% to 8% of the cost of the property. For comparison, in London this figure is at 2.9%, and in Hong Kong - 2.3%.

Buying property in Dubai is a great way to increase your investment capital. By choosing the right strategy, the owner of the apartment not only ensures a constant flow of profit, but also gets the opportunity to become the owner of a UAE Golden Visa.