Renting a home in Dubai as an expat is becoming more and more challenging. Faced with skyrocketing rents, more and more expatriates are considering real estate purchases to continue living in the city. What are the benefits of this investment? How can one become a homeowner in Dubai? Here are some insights and practical advice.
A new boom in Dubai's real estate market
How high will Dubai's real estate market soar? In 2023, there was already a 28% increase in apartment rents compared to 2022. Expatriates had to spend an average of 100,000 dirhams per year (over 27,000 dollars) on accommodation. According to industry experts, the rental market is in full swing after a cool-down due to the pandemic. Some areas in Dubai saw rent increases of over 30% between 2022 and 2023, with slightly more moderate increases in other sectors (between 20 and 25%). Rent prices for villas are rising faster than apartment rents.
This rent explosion is not just a post-COVID catch-up but is also due to high rental demand. Dubai continues to attract expatriates, as the government mainly targets foreign workers. During COVID-19, the UAE promoted the safety of its territory and simplified immigration procedures to attract students, young talents, investors, and foreign professionals. The operation was successful: according to official statistics, Dubai currently has 3.6 million inhabitants, and the government is looking to a further increase to 5.8 million by 2040.
The downside is the rapid population growth (over 100,000 in one year) strains the real estate market. Builders are not able to keep up with demand, causing prices to skyrocket. Wealthy foreigners add to the real estate tension, driving rental market prices even higher. Many investors, sensing a good deal, have turned to seasonal rentals, which are more profitable than yearly rentals. As a result, rents are soaring, pushing more expatriates to consider buying property.
Buying to continue living in Dubai
According to the Dubai Land Department, a government institution overseeing real estate transactions in Dubai, 2024 is shaping up to be another record year. Apartment sales increased by 42.1% between April 2023 and April 2024, while villa sales rose by 11.3%. With rents rising (between 20% and 25% from April 2023 to April 2024), buying is becoming one of the only ways for expats to keep living in Dubai. The soaring rents make purchasing more attractive, with rental amounts now matching mortgage payments. In Dubai, rent amounts can be revised annually according to the index set by the Dubai Land Department. The attractiveness of Dubai's real estate market keeps drawing foreign investors, pushing prices even higher. Dubai is always under construction, with new areas like Dubai Creek Harbour aiming to become the neighborhoods of the future. These ongoing constructions attract more foreign investors, giving residents another reason to buy property. Real estate purchases also represent a safe investment. However, others make the opposite choice and leave Dubai, finding it impersonal and distorted by money and endless construction projects.
Has Dubai lost its soul?
So what's the price of staying in Dubai? While becoming a homeowner is the solution for continuing to reside in the cosmopolitan city, it only suits some expats. Buying property in Dubai is indeed a profitable investment, as long as you have the means. The constantly rising rental prices are pushing expatriates to leave Dubai for other cities or Emirates with a lower cost of living.
The surge in Dubai real estate prices comes with a spike in other living costs: food, school fees, etc. Tax incentives, which still attract many expatriates, are no longer always sufficient to offset the rising costs. While there is an increase in property purchase projects by expatriates, there is also a rise in departures. Today, Dubai, dubbed "one of the fastest-growing cities for the super-wealthy", attracts and dismays thousands of foreign residents.
Long-term immigrants have seen their city transform, but it is not always for the better. They struggle to find the Dubai culture, diluted in giant towers and Instagrammable constructions. They remind us that the city is more than the image portrayed on social media. They support innovation but also the transmission of the city's history, which they believe cannot be written without its inhabitants. However, the price surge might drive residents away, replaced by investors disconnected from the reality of life in Dubai.
One way for residents to keep Dubai's history alive is to invest in culture as much as in real estate. This is also a challenge for a city aiming to become an international hub: continuing to develop while preserving its originality.
How to become a homeowner in Dubai
The process of buying property in Dubai is not restrictive but follows certain rules. The property must be located in a designated area: the government has established free zones where expatriates can buy real estate. These are mainly modern and popular neighborhoods, such as downtown Dubai, Palm Jumeirah, Jumeirah Beach Residence, Discovery Gardens, and Dubai Marina. Authorization from the Dubai Land Department is also required to start the purchase process. Expatriates need to present their resident card (the purchase is also open to non-residents) and pay a 10% deposit to the seller.
To avoid unpleasant surprises, ensure the real estate agent handling the transaction is registered with the RERA (Real Estate Regulatory Agency), a branch of the Dubai Land Department regulating the real estate market. Future buyers are strongly advised to learn about RERA's missions and the applicable property purchase laws.
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