The potential of the UAE as a real estate investment arena is now a global phenomena
A constitutional federation of seven emirates makes up the United Arab Emirates (UAE). Of these, Dubai and Abu Dhabi are the best known to the Western world as it is in these emirates that the majority of overseas property investments in the UAE have taken place. The remaining five emirates of Ajman, Fujairah, Ras al-Khaimah, Sharjah and Umm al-Qaiwain are commonly referred to as the Northern Emirates and some of these, such as Ajman, are fast growing in popularity as emerging UAE markets.
In the absence of regulatory issues to affect the market for architecture, construction and engineering services, international construction projects are now underway to supply the high levels of demand from within the UAE’s large foreign community.
If you are considering purchasing a property in the UAE, a look at our Guide to Property in UAE will help you gather information about properties and sought after locations in the UAE, as well as gain knowledge of the property buying process. If your UAE property purchase is aimed purely as an investment vehicle, it is important that you view our UAE Property Investment section.
UAE Property Market Overview
The oil industry has attracted a surge of expatriates and foreign workers who together make up more than 75% of the population, producing an ongoing demand for top quality property in the UAE in which to live and work. This has brought the UAE one of the most buoyant and dynamic construction sectors in the world, which is the third largest industry in the UAE, after oil and trade.
The UAE is recognised in the global property world as a highly lucrative investment opportunity, and international joint ventures are working for the financial benefit of both the local and international population.
Average hotel occupancy levels in 2006 reached over 90%, leading to the strong need for new construction in the UAE. Mammoth construction projects have since been underway, particularly in Dubai, Abu Dhabi, Ras al-Khaimah and Ajman, not only within the services sector, but also in the residential and infrastructure sectors – all signs of serious investment activity and growth in the UAE.
UAE Property Investment
Since the 1960s when Abu Dhabi was the first emirate to begin exporting oil, the entire UAE’s social and economic identity has been completely transformed into one of a high standard of sophisticated living.
The UAE is an important regional trading and tourism hub, with widespread, booming construction underway to keep up with international and local demand for real estate. As a highly industrialised federation, the UAE boasts one of the most developed economies in the planet, reflected in its GDP per capita, ranking 5th in the world and 3rd in the Middle East, after Qatar and Kuwait.
Capital growth varies from emirate to emirate, with the highest levels having been achieved over the past five years in Dubai. Today, annual figures average a more stable 15% in Dubai; however, property investment in today’s emerging emirates such as Ajman is seen as a new and exciting prospect for investors who are now looking at potential returns of some 25-40% per annum. They hope to reap similar kinds of rewards to the timely investors in Dubai back in 2002.
The Northern Emirates are beginning to absorb overflowing demand from Dubai, and investors are taking advantage of lower costs and the need for widespread development to keep up with demand. Expatriates play an important part of the rental market in the Northern Emirates, but surging rents and low interest rates, for now, are encouraging many people to buy property in the UAE, in preference to paying rent.
Reasons why property in the UAE is a good investment
- Year round sunshine
- Tax-free environment
- Cosmopolitan community
- One of the world's highest standards of living
- Relatively low property prices and strong capital growth
- High rental yields (6–10% p.a.)
- Low inflation
- USD pegged to the Dirham, creating no currency exchange risk
- One of the safest property locations in the world
- Low cost of living
- Stable currency
- Peaceful co-existence of ethnic groups
Homebuyers in the UAE
Two out of three new freehold properties in the UAE are bought by foreign corporations or individuals - an unsurprising figure considering only 15-20% of the total population of 4.4 million is composed of UAE nationals. Home owners currently account for around just 30% of the market but only 5% of them are UAE nationals.
UAE Property Hotspots
The property hotspot has traditionally been Dubai, due to a business environment so conducive to foreign investment. Less dramatic, though stable investment returns still characterise much of the Dubai market, but other emirates are now turning the heads of discerning property investors, eager to speculate while prices and conditions are still strong for investment.
Currently the UAE is experiencing a shift in population from Dubai to emirates such as Sharjah, Ajman, Umm Al Auwain and Ras al Khaimah as a direct result of Dubai’s sky-rocketing rents.