Investment opportunities are abundant in the world of Dubai real estate. However, one of the critical decisions investors face is the choice between buying Dubai investment apartments in 2024 or villas, especially when moving to the UAE, particularly Dubai. To understand which property in Dubai is better to buy and which is more profitable to maintain, you must compare both options and assess your needs.
What are the market trends? Is investing in real estate in Dubai profitable?
Today, real estate prices in Dubai continue to rise. Among the factors determining the cost are the area of the property, the availability of infrastructure, distance from tourist centers, and transport accessibility, which is extremely important for potential buyers. Purchasing city property provides a safe, conducive, and luxurious life and is also a reliable and profitable investment decision. Such a purchase helps preserve capital from the risk of inflation and creates a stable source of income.
Here are some reasons why it is profitable to invest in Dubai real estate:
- Significant rental income. Real estate in the city provides higher rental income than in other countries worldwide. For example, in Britain, rental income is 4-10% per annum, while in the emirate, it can reach 13%.
- Payment for the year in advance. Unlike many European countries where rent is paid monthly, rent is paid a year in advance using bank checks. The annual cost can be broken down into certain payments, usually between 1 and 4 checks. This allows the owner to receive a large amount at once, which is profitable, especially if the housing was purchased on credit or in installments with payment after delivery.
- No personal income tax. In the United Arab Emirates, individuals are exempt from paying income tax, including rental income.
- No agency commission. Unlike many cities worldwide, in the Emirates, the owner is not required to pay a monthly percentage of the rent to the rental company for his property to manage it. In some European countries, the property owner must periodically transfer a certain percentage of the amount to the agency, which can reach about 8% in the case of, for example, the UK. This leads to significant financial costs for owners.
- Possibility of obtaining a resident visa. The purchase of property opens the possibility of obtaining a long-term resident visa of the United Arab Emirates for two or five years, subject to sale for 750 thousand dirhams (or 204 thousand US dollars). You can purchase a spacious studio or one-bedroom apartment, fully finished and furnished, or find a two-bedroom option. This UAE visa provides access to banking services, work, medical care, education of children, obtaining a driver’s license, and many other privileges.
Cost of purchasing and maintaining apartments and villas
Apartments are one of the most popular and profitable types of real estate. Their prices show a significant spread. In central areas such as Downtown Dubai and Dubai Marina, apartment prices can be significantly higher than outlying areas. As of 2023, this is approximately 18,000 – 25,000 dirhams per square meter. For example, if we consider an apartment with an area of 80 square meters, then on average, its maintenance will be $1,490 per year. Regarding villas, they are primarily located in eminent areas and offer premium amenities, while prices may vary depending on the amenities offered. So, the average cost of a villa can exceed AED 20 million. For example, the annual cost of maintaining a villa in Palm Jumeirah can vary from AED 50,000 to AED 150,000 or more. However, it is essential to emphasize that any real estate, be it a villa or apartment, will always be more affordable at the construction stage, that is, off-plan stage.
Profitability of investments in apartments and villas
For long-term apartment rentals, you can count on a yield of 5-8% per annum and, in some areas, up to 9-10%. In the case of mansions, the expected profit is about 3-6%. The location of the object plays an important role. The highest ROI rates are typically found in newer areas of the city, such as Dubai Land and Business Bay.
Thus, the choice between an apartment and a villa for investment depends on your goals and budget. AX CAPITAL presents a wide spectrum of both options. You just need to decide what you really need. Apartments typically provide higher rental yields (5% to 9%) and access to a resident visa. The villas have a profitability potential of about 8.5% and are in demand among families with children. The location of a property plays a vital role in the return on investment, and new areas of the city often provide the most significant returns.