Buy Real Estate in Dubai - Experiences? Yield?

[troubled soul]

Service fees and maintenance will eat your rental income, in some places it's crazy - like 30-50% of rentals go towards service fees. Price depreciation is real - in 10 years you might get 30-40% of rental income but the price may drop by 10-20%. When accounting to taxes (4% when buying + agency fees) you might get the income comparable with what you get in the UK or some EU countries.

True.....Most safest area for investment are Marina, JBR and Downtown but this area's building service charges is like crazy.....

 

[manukahoney]

And at last but not at least, the Council tax. For a 250k GBP property it costs more than my service charges for the property of about the same value!

From my experience the renter pays the Council tax in the UK. So you only pay income tax on your rental income.
Your overall income in the UK will still be lower percentage-wise than in Dubai of course.

 

[Paul Tudor Jones]

Absolutely not worth it for all the circus you have to go through.

Any average investment advisor today can put together a bond portfolio for you that has a SIGNIFICANTLY better risk/reward ratio and you can liquidate the bonds more easily and easily move them back and forth across the world as needed.

The only point of buying real estate in Dubai or even London as an "investment" is that you can park your (questionable) assets offshore outside the banking sector (without CRS/AML/KYC checks).
For personal use, of course, anyone can buy what they want as "consumption", but it's a mystery to me who would bother with so much effort for such returns.
An interest rate of 4-5% on the dollar is currently considered a risk-free interest rate.

If you want more risk, have fun getting a high LTV at Dubai banks which can margin call you at any time according to local law.
Then rather invest in good REITS with leverage.

Amen to that.

Many amateurs (and this forum is mostly amateurs) investing in real estate simply don't know how to calculate CAGR and look at their overall % gain as if that is describing the whole picture.

If you bought a property for 100k and 10 years later it's 300k, you think you've done a great investment and probably can't wait to tell all your friends about what an investment genius you are for picking a great property in a great market.

Well, in CAGR terms it's only 11.61% per annum and you would have been better off just buying an ETF (SPY returned 12.35% last decade) and you would have made more money with less headache. And this is NOT including stamp fee, fixes, issues, potential legal and regulation changes. Not to mention that most properties did not triple in value in the last decade, in some markets property even went down. If you bought in Dubai in 2007-2008 you are still -50% underwater. And not including the illiquidity of it, exposure to a single market and a single area and countless other risks.

Of course people that are already invested in real estate are immensly biased and will keep extolling real estate as if it's going up non stop, but a closer look reveals a more accurate picture.

 

[algotrader]

Well, in CAGR terms it's only 11.61% per annum and you would have been better off just buying an ETF (SPY returned 12.35% last decade) and you would have made more money with less headache. And this is NOT including stamp fee, fixes, issues, potential legal and regulation changes. Not to mention that most properties did not triple in value in the last decade, in some markets property even went down. If you bought in Dubai in 2007-2008 you are still -50% underwater. And not including the illiquidity of it, exposure to a single market and a single area and countless other risks.

IMO, real estate investments make only sense if you use it for yourself instead of paying rent or buy/develop it via company using mortgages like Donald Trump. If your investment is successful you privatize the profit, if it fails you socialize the losses to the bank (and the bank socializes it to the taxpayer).

 

[Paul Tudor Jones]

IMO, real estate investments make only sense if you use it for yourself instead of paying rent or buy/develop it via company using mortgages like Donald Trump. If your investment is successful you privatize the profit, if it fails you socialize the losses to the bank (and the bank socializes it to the taxpayer).

Even if you save by not paying rent, you end up locking up a lot of cash just for the privilege of not paying rent. If the yield on rental property in your country is 4-5% but you can get 12% in your business or just by buying an ETF, then you're better off renting and investing that chunk of money for 12% instead of locking it at 4% yield.

About using mortgages \ leverage - 100% agree.

 

[BarleyMalt]

Even if you save by not paying rent, you end up locking up a lot of cash just for the privilege of not paying rent. If the yield on rental property in your country is 4-5% but you can get 12% in your business or just by buying an ETF, then you're better off renting and investing that chunk of money for 12% instead of locking it at 4% yield.

About using mortgages \ leverage - 100% agree.

There is also a "utilitarian" aspect regarding owning the property you live in. You can enjoy it as you want, and don't have to worry about co-ownership with the actual owner. For instance, if an appliance breaks, you can replace it as you want, whereas with a rental you'd probably have the lowest quality option. Because you'll probably end up spending a lot of time in your home, this should be taken into account.

In my experience, this is a quality of life benefit that is hard to price in regarding decision between owning and renting real estate.

Re-Dubai, owning the flat you live in would give you the incentive to fix/replace the crappy materials, since you'd internalize the resulting improvements.

 

[santogrial]

At the moment I bought the property the interest rates where - negative!
So far I got about 16% back in rents and the value of the property is at about 20-30% higher than I paid for so - so far so good.

Very good IMO.
Did you rent long term or short term (airbnb) to get that 8.5% return?

 

[JimBeam]

Very good IMO.
Did you rent long term or short term (airbnb) to get that 8.5% return?

Long term.

With short term you could earn more - but it's a totally different game!
Place needs to be furnished (I'm renting my unfurnished), you need the cleaning staff staff and many other things.

Also, for such thing you need to have property in prime location.
My property is not in prime location and is not suitable for short-term rentals in general.

 

[PinkCat]

Long term.

With short term you could earn more - but it's a totally different game!
Place needs to be furnished (I'm renting my unfurnished), you need the cleaning staff staff and many other things.

Also, for such thing you need to have property in prime location.
My property is not in prime location and is not suitable for short-term rentals in general.

8.5% is a great return for long term rent in Dubai from my research, aggregated data showing more like 4-6% return on average
what did you do to have return so much above average?

 

[JimBeam]

Actually, in Dubai right now the average gross rental yield is 6.68%.

Having 8.5% is easy if you bough it at the right time when the price was lower. My rent is about higher 20% more than projected when I bought the property few years ago due to increase in real estate prices - and also rental prices (as that's connected).

Getting the same returns now is not impossible but it's harder and riskier as now the real estate prices are at new ATH.

So, if both property and rental prices go down you'll won't be able to resell the property for what you have paid for AND your rent may decrease.

So, as with any other asset, buying it at ATH is risky.

 

[Konstanz]

How easy is to rent properties in Dubai nowadays?
I understand many russians are flocking to Dubai

 

[JimBeam]

How easy is to rent properties in Dubai nowadays?
I understand many russians are flocking to Dubai

Depends on many factors so I can only generalise.
If it's in prime location (or close to metro stations) - should be fairly easy.

I have a company that manages everything for me so I really don't worry much about these things.
The demand is still big as according to latest report 100k people came to Dubai this year alone so again if it's the right thing at the right place or at right price should be fairly easy.

 

[4br]

I am looking to buy an apartment. Does anyone have any insights into what you can typically offer under the asking price?

From what I can see sales appear to be 15% below asking price.

 

[aniglo22]

I am looking to buy an apartment. Does anyone have any insights into what you can typically offer under the asking price?

From what I can see sales appear to be 15% below asking price.

You have to lower your standards if you come from Europe regarding construction quality . And also get an construction expert (who you can trust ) to inspect it before buying anything . A lot of gypsum walls nowadays so you should check if you can live together with your neighbors.

 

[JimBeam]

And also get an construction expert (who you can trust ) to inspect it before buying anything . A lot of gypsum walls nowadays so you should check if you can live together with your neighbors.

I have not seen a lot of these dry walls. Mostly the walls are built of some cheap blocks that look like Ytong blocks. Construction expert will not help you much as you can just knock on the wall and figure out if it's a dry wall or the real wall. Also sometimes the problems are the pipe noise (someone flushing the toilet 10 flors up) and you hear this in your bathroom or even living room (yes I've been in a flat where this is an issue) so no construction expert can detect this or how the insulation is done and will you hear the neighbours etc when the building is empty etc.