Top-10 myths about buying real estate in Dubai

Buying real estate in Dubai is profitable in terms of both investing in your own future and preserving your capital. An apartment or a house in a country with a warm climate, low taxes, and a developed economy would be a great place to relocate or spend a seasonal holiday, and the stable growth of housing prices makes such a purchase a reliable and highly liquid asset. However, there are many myths about real estate in the UAE that may confuse investors. In the article, we will discuss whether you need to be a millionaire to buy an apartment in Dubai, if there is private property for foreigners in the UAE, and whether buying a home in this country is extremely long and difficult — we will discuss in this article. Aram Grigoryan, senior real estate consultant of the AX CAPITAL agency, will help us clarify the most popular myths.

Contents:

• Myth №1. Foreigners can’t buy real estate in Dubai as a private property
• Myth №2. You have to be a millionaire to buy property in Dubai
• Myth №3. Personal appearance is required for purchase
• Myth №4. Non-residents can’t get a mortgage
• Myth №5. Developing areas are not attractive
• Myth №6. Sea or desert
• Myth №7. A “bubble” in the UAE real estate market
• Myth №8. There is a residential property tax in Dubai
• Myth №9. Buying property in Dubai is a long and complicated process
• Myth №10. Real estate in Dubai is better to buy without an agent

Myth №1. Foreigners can’t buy real estate in Dubai as a private property

In the United Arab Emirates, there are two types of property ownership for foreigners: leasehold and freehold.

• Leasehold is the right of long-term lease. It is the kind of ownership that tends to be brought up in the myth mentioned above. Indeed, if you buy a property in a leasehold, you get ownership for a fixed time period, which is no more than 99 years. At the end of the leasehold, ownership reverts to the original owner. Leaseholds can be renewed, but this involves many restrictions: even simple repairs will require the owner's permission. Moreover, if you buy such a property on the secondary market from another foreigner who acquired it, for example, 20 years ago, you will own the property for 79 years. Today, this type of real estate is quite rare.
• Freehold is full private ownership, including the land where the property is built. The Dubai Land Department (DLD) puts the buyer on the register as the owner and issues a title deed to the property. Such properties can be sold, leased, and bequeathed. There is no time limit on ownership.
• Today, foreigners have access to dozens of freehold areas in the most attractive locations in the UAE. Major parts of New Dubai, including the iconic Dubai Marina, Palm Jumeirah, Jumeirah Lakes Towers, Downtown Dubai, and Business Bay, have freehold status. It is impossible to name the exact number of such zones, as they are constantly growing. Currently, there are about 80 freehold districts and communities in Dubai.

Myth №2. You have to be a millionaire to buy property in Dubai

Another popular misconception is that to buy real estate in Dubai, you need a huge capital, and you can only buy penthouses and huge villas by the sea. This, of course, is not the case. In the emirate, there is a huge choice of real estate for all tastes and budgets. As Aram Grigoryan notes, here you can buy an apartment worth from AED 440,000 ($120,000). It will be housing in developing areas, and in some cases, such a purchase may be even more profitable than ready-to-use real estate on the beach. Moreover, you can buy real estate without having a full sum as developers in the UAE offer an interest-free instalment plan, which is in many respects superior to a mortgage. There are plans with post-payment for three to five years after the completion of construction. You will be able to live in the new building or rent it out and pay off the instalments according to a chosen schedule.

Myth №3. Personal appearance is required for purchase

This is not true. Today, at least 60% of real estate transactions in Dubai are made remotely. If you buy a secondary residence, you need your trusted representative — an employee of the real estate agency can take this role. You will only need a passport. You will be able to see the property via photos, videos, or documents from the developer, if the object is still under construction.

Being a UAE resident is also not required. More than that, you can get a UAE residence visa, if you buy real estate worth AED 750,000 ($204,000). Previously, this amount was AED one million ($272,500), but the limit has been lowered. The Dubai government welcomes investors and strives to create the most comfortable conditions for them.

Myth №4. Non-residents can’t get a mortgage

UAE banks provide mortgages to non-residents, but on less favourable terms than for residents. The down payment will be 50% compared to 20% for residents, the interest rate may also be higher. On average, it ranges from 3 to 6.5% per annum in the country.

Myth №5. Developing areas are not attractive

Novice investors believe that the only profitable investment property is in central or coastal areas. Professional brokers would disagree with that statement.

“If you’re making an investment, it’s worth buying property in an area that’s currently developing. Prices for such properties are lower, and they will rise at a higher rate. Consequently, for investments, such an option will be more profitable,” says Aram Grigoryan.

In particular, the cost of housing increases when the metro line is built or infrastructure appears in the area. This is a stable trend observed in the emirate. In addition, in accordance with the master plan of Dubai development, by 2040 there will be two new centres in the city. In the early stages, real estate there will be much more profitable than in already completed coastal areas, and you will be able to invest in the location, which will soon become the new Dubai Marina.

Myth №6. Sea or desert

Some investors believe that real estate by the water in Dubai can only be found on the shores of the Persian Gulf or the Dubai Canal. This is not true. Developers in the emirate are aware of the popularity of coastal housing, and today a number of new projects have a unique phenomenon, which is crystal lagoons. In fact, it is a man-made sea in the desert. You can buy real estate in a developing area and at a bargain price and get an apartment or a villa on the shore with a water reservoir, a sandy beach, stunning views, and a variety of resort activities.

Myth №7. A “bubble” in the UAE real estate market

Housing prices in Dubai have been rising for several years, and there is a popular opinion that the real estate market in the emirate is oversaturated, it is a financial bubble that will soon burst. However, the reality is different. “Honestly, I have been hearing this for years. The bubble did not burst, and there is no bubble in fact,” says Aram Grigoryan.

Firstly, foreign investments in real estate are a major income source for the country. Therefore, there are a number of measures restraining the unhealthy growth of the market. One of them is a 4% fee to the DLD, which must be paid when buying real estate. This fee was originally 2%, but it was raised to 4% to avoid speculation and make it unprofitable to buy a property and resell it the next day. This restrains the market and makes investments safe.

In addition, there are official statistics on the risk of financial bubbles in the real estate sector in different cities around the world. According to a 2022 report by Swiss holding UBS, Dubai, along with Warsaw and Sao Paulo are among the three safest markets with natural price increases, and no bubbles are expected here in the near future. Toronto, Frankfurt, and Zurich are in the top three of the red sector.

Myth №8. There is a residential property tax in Dubai

Despite the fact that the UAE’s favourable tax policy is widely known, it is possible to encounter this misconception. It is also incorrect: residential property in the UAE is not taxed. Yet, when buying a commercial property, you will really need to pay 5% of VAT. In other cases, no taxes will be required regardless of the property value. There is also no tax on the income you will receive when renting the acquired housing.

Myth №9. Buying property in Dubai is a long and complicated process

Another myth is that the procedure for buying property in Dubai is long and difficult. It is not. The process is very simple and transparent. To buy a property, you only need a bank card to pay the deposit and a copy of your passport, which can be sent to an agent or a developer’s representative. The transaction in the secondary market is a more complicated process, but everything can be easily solved by contacting an experienced broker.

Myth №10. Real estate in Dubai is better to buy without an agent

Finally, the last myth is about buying a property without an agent. Formally, you can actually do it yourself, especially when buying a property from a developer. However, in real life, without having profile expertise and knowing the peculiarities of the market and specific areas, you might choose a property that is not profitable and be disappointed in the result.

“I would compare buying a property without an agent to self-medicating through the Internet. Not all information online is correct. There are many helpful articles, and there are many unhelpful articles. I recommend using the experience that agents have built up over the years,” concludes Aram Grigoryan.