Why Invest in Dubai?
There are many reasons why not only UK nationals, but all nationalities, are purchasing property in Dubai.
- Dubai property prices are low compared to those in the UK and popular European countries where markets are at all time highs. Even after price increases over the past 2½ years, the average villa or apartment in Dubai is about ? of the price per square foot compared to cities like Singapore, Shanghai and London.
- Property in the UK, Spain, Ireland and Florida has proved a good investment for many private clients. However, many of these markets are plateauing or coming off their highs after five strong years. Investors are increasingly taking profit and looking for new markets to invest into like Dubai.
- The reputation of Dubai property has been growing internationally and more than ? of the buyers are from the UK, Kuwait, Saudi Arabia, Iran, Russia, India, Pakistan and other European countries. This wave of overseas buying only really began in Q2 2004 and is for both investment and lifestyle reasons.
- The UAE is very attractive from a tax perspective with no income tax or capital gains tax and the government is committed to retain the current tax structure for at least the next 50 years.
- An increasing number of businessman are moving their personal and business bases to Dubai, as it is tax friendly not only for individuals but also for corporates. It has good communications being sited midway between Europe and Asia and offers a number of free trade zones within which overseas corporates can base their businesses.
- Many of the overseas buyers want to purchase apartments or villas here in Dubai close to the coast, either for use as holiday homes or holiday lets. Tourism growth in Dubai is 17% per annum, and almost 15 million visitors are expected by 2010. Hotels boast one of the world's highest occupancy rates and there is likely to be a strong holiday letting market for tourists visiting particularly with families.
- There is no stamp duty, legal fees or survey costs involved in buying freehold property in Dubai - apart from a 1.5% land registry fee on completion.
- Property has only recently been open for purchase by non UAE Nationals and therefore many investors view there to be a huge potential for growth in the Dubai property market. Freehold laws are expected to be finalized later in 2005 giving overseas investors the security of full freehold title.
- Demand for property in Dubai continues to greatly exceed supply. In 2004, 240,000 new residents moved into Dubai swelling the population above 2 million. If only a quarter of these need upscale housing, 60,000 new homes will need to be completed rapidly, keeping upward pressure on the market. Rents are rising rapidly, and newly completed villas and apartments are snapped up and occupied quickly as buying and mortgaging a property is generally cheaper than renting.
- At some point supply will begin to exceed demand even with Dubai's massive rate of population growth, but that is not predicted to occur until at least 2007.
- In the meantime, high rental yields of around 8-10% per annum attracts significant investment.
- Property is becoming easier to finance with mortgages, and many international banks have now entered the market like Standard Chartered, HSBC and Lloyds TSB. The increased availability of mortgages has attracted both local and overseas interest.
Dubai Properties - what do you get for your money?
- A resident's visa is received with the purchase of every property, which allows the owner and their family to reside in Dubai but does not include automatically a work permit. This has proved particularly popular for Asian investors and the one billion residents from the Indian sub continent for which Dubai is their Costa del Sol!
- Properties in Dubai are all finished to a very high standard. Villas are generally detached, with gardens and communal landscaping. Townhouses are far more spacious than equivalent apartments in many cities, and the average 2-3 bedroom apartment in Dubai is probably double that of its equivalent in London, Singapore or Hong Kong. Luxury finishes are routinely available, and the Gulf market has always priced well finished properties at a premium.
- Many UAE developments offer free or discounted access to superb facilities ranging from swimming pools, golf courses and equestrian centres to health clubs and spas. A large number also include on-site bars, restaurants and supermarkets.
A 'can do' Government
Much of the success of Dubai's remarkable economic development can be attributed to a progressive and enlightened Government with a clear vision and strategy for the country's economy. It is also a Government which has a remarkable track record in executing large, complex and ambitious projects.
The highly attractive range of incentives which the Government has put in place for inward investors includes:
- Zero tax on profits and income
- 100 per cent repatriation of capital and profits
- 100 per cent ownership in free zones
- No foreign exchange or trade barriers
- A stable and freely convertible currency pegged to the US dollar
- A low common external tariff of 4 per cent (with commodities such as food items, pharmaceutical products and raw materials exempt)
- Fast track, 'one stop shop' company formation in the free zones
Dubai is emerging as the business, shopping and tourism centre for the region, sitting strategically as it does, half way between Europe and Asia.
The scale of construction and development has to be seen to be believed, and is akin to the sort of growth that Hong Kong and Singapore experienced in the late 1980's. Probably only Shanghai has the same sort of growth rates and speed of development, and this is based more the demographics of the Chinese population.
There is enormous wealth centered in the Middle East, principally because of high oil and gas prices, and a large proportion of this wealth is finding its way into local residential and commercial property markets. Overseas investors have the opportunity to get in early on this land development boom which is predicted to last the next five to eight years in terms of development.
Prices have risen but are still cheap by overseas standards. There are many different types of properties to suit investors' tastes and whilst there still remain specific opportunities for short term gain, the market is now developing into a more mature and structured market.