Hot spot for real estate, tax haven and holiday magnet – Dubai has been very successful attracting investors, tourists and new residents from all over the world for over 20 years. And in times of international crises, the emirate is even more sought-after as a refuge.
By Gerald Paschen
Dubai is fascinating at first sight. The metropolis of the emirate of the same name offers not only spectacular buildings, state-of-the-art architecture and exceptional luxury hotels, but also a mix of oriental and maritime facets on the Persian Gulf. The superlatives shine here: the tallest building in the world, the Burj Khalifa (828 m) or The Palm Jumeirah, an island artificially created in the sea in the shape of a palm tree, as well as the Burj Al Arab, one of the most luxurious hotels in the world, which rises up on the coast in the shape of a sail. Dubai City Airport is one of the most important aviation hubs. In July 2022, it was even the largest in the world in terms of passenger volume.
Dubai is never boring: it offers year-round beach life, polo, marinas, promenades with restaurants and cafés. Even winter sports are on offer on a huge indoor ski slope or on an ice-skating rink. You can dive not only in the sea, but also in Deep Dive Dubai, a 60-metre-deep pool. Mountain bikers can enjoy the trails in Mushrif National Park. Outside of the city, the sandy desert landscape is a favourite spot for adventure tours.
And nowhere is shopping better than in Dubai: For example, you can discover Deira, the oldest district on the east bank of the Dubai Creek, where you can find inexpensive shops and souks for gold and spices. Dubai Festival City, with the mall of the same name, is also located on the creek. It is a modern district with numerous shops with international brands and entertainment facilities. And in the city centre near the Burj Khalif, the largest shopping centre in the world, the Dubai Mall, awaits
Coveted tax haven
Dubai also remains attractive for expatriates and entrepreneurs. The Emirate of Dubai is part of the United Arab Emirates (UAE). It offers good conditions that favour business activities, investments and permanent residency. Those who choose to live here enjoy a high level of security and a good infrastructure, for example in terms of clinics and schools. Above all, however, the tax system is attractive: there is no income tax in Dubai. This applies to income from home and abroad and includes salaries, pensions, capital gains, dividends and sales proceeds.
A wealth tax as well as an inheritance and gift tax do not apply. However, traditional value-added tax has been levied by the UAE at a rate of 5 per cent since 2018. And from June 2023, a corporate tax of 9 per cent of annual profits is planned to be introduced. This is still very low by international standards. Companies operating in the various free trade zones of the UAE have enjoyed tax exemption and full property rights for years (this protection is designed to last 50 years). There are various ways to obtain a residency or visa in Dubai. These usually include minimum financial requirements such as investments, business start-ups, assets or certain incomes. Recently, for example, the Golden Visa programme was reformed. Since April 2022, it has been possible to obtain a long-term visa (10 years) with the purchase of a property from 2 million dirhams (AED), about 530,000 euros. And when it comes to real estate, Dubai has a lot to offer.
Real estate market on the upswing
The emirate is one of the most important hotspots in the world for buying real estate. Foreigners have been allowed to buy villas and flats here since 2002. Since then, there has been a lot of investment in the emirate. Money is available, largely because the oil wells in the UAE continue to gush. Dubai‘s skyline of high-end residential complexes in modern architecture is spectacular. With artificial canals, islands, inland lakes and golf courses, new prime locations are constantly being created and entire residential districts are being built from the ground.
Since September 2020, a steady rise in property prices has been evident again. In the first half of 2022, not only the real estate market but also the dirham is showing great strength. Only June 2022 saw a slight dip in prices (- 0.1% on the previous month), but the number and value of transactions has risen surprisingly sharply at the same time.
From 1 January to the beginning of August 2022, around 51,000 property transactions have already been registered in Dubai (+ 56.6% on 2021). So in Q2 2022 alone, there were a total of 22,482 transactions – representing increases of 50.8% for flats, 33.9% villas, 8.5% for commercial properties and 57.5% for land. Dubai‘s total sales value in Q2 actually increased by 61.5% and amounted to AED 59.3 billion (15.7 billion). The average price per square foot (sqft) is currently AED 1,151 (3,282 euros/m2). Around 31 percent of sales in Dubai are under AED 1 million (265,000). Around 60 percent of properties change hands for between AED 1 and 5 million (approx. 265,000 – 1.33 million).
Finest addresses
The most sought-after zone in Q2 2022 was Business Bay. It had the highest sales volume with 1,959 transactions. It is a development area located in the heart of the city on an area of 436 ha with retail, shops and luxury flats. Plans call for over 200 skyscrapers. For flats here you currently have to pay an average of AED 1.1 million (approx. 292,000) or AED 1,764/sqft. (5,030 euros/sqft). Dubai Marina follows in second place. The ambience impresses with a futuristic flair and many modern skyscrapers, which are primarily located along an artificial canal. The scenery is maritime with piers, yachts, restaurants, cafés, trendy shops and waterfront promenades. Dubai Marina is also one of the largest zones where foreigners can acquire full ownership.
Flats here cost an average of AED 1.41 million (374,000) or AED 1,658/sqft (4,728/m2). The most expensive flat sale in Dubai Marina this year was a property in the Five Luxe project for AED 48 million (approx. 12.7 million). In third place in the sales volume ranking is Downtown Dubai. The city centre is a mixed-use area with residential and commercial properties as well as many attractions (Burj Khalifa, Dubai Mall, Aquarium, Opera). Families like to live in the prestigious city centre. It is well supplied with kindergartens, schools, universities and clinics. Flats here average AED 2.32 million (approx. 615,000). The record price here this year was AED 51 million (13.5 million). The top areas for flats include Dubai Creek Harbour, Jumeirah Village Circle, Sobha Heartland und Jumeirah Lake Towers.
However, when it comes to the most exclusive properties (villas and flats) that have been sold, Palm Jumeirah is the front-runner amongst Dubai‘s residential areas. The Palm Island offers classy hotels and residential complexes, a boardwalk, beach clubs and nightlife. In Q2 2022, a coastal villa here changed hands for AED 126.25 million (approx. 33.5 million). The top price for a flat was AED 82 million (approx. 22 million).
For high-end villas, Dubai Hills Estate is a perfect choice. The highest-quality properties are grouped around a golf course on spacious plots (1,800 – 2,000 m2). Prices of around AED 100 million (just under 27 million) are paid for them. Dubai Hills also offers flats. Those looking for a villa have plenty to choose from in Dubai: Zones such as Jabal Ali First, Emirates Living, Arabian Ranches, Damac Lagoons and Tilal Al Ghaf offer the dream of owning a home in Dubai.
The emirate is considered a safe haven.
For villas off plan, the average price in 2Q 2022 was AED 1.8m/477,000 (+9.8% on 2Q 21. Prices for finished villas are rather stable. They cost an average of AED 2.7m/ 715,000 (+0.1% on 2Q 2021).
However, the increase in rental prices in the top zones is remarkable. Within one year, these have risen by 24 per cent for flats in Downtown Dubai and Palm Jumeirah, followed by Dubai Marina and Dubai Beach Residence (both +23 %). For villas, Dubai Hills (+42 %) and Palm Jumeirah (+41 %) recorded the highest rent increases.
One can see that especially in these uncertain times of crises, wars as well as high inflation concerns, Dubai has become even more appealing for many. Investors and wealthy people from all over the world are trying to create a second foothold for themselves here.