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Real estate is profitable; thanks to globally high rental yields and low taxation, Dubai attracts property investors worldwide. You’re in the right place if you’re interested in becoming a landlord in Dubai and everything Dubai has to offer when investing in property.

Dubai is a vibrant city that features on the want list of those searching for a luxury break or somewhere more permanent. But this exuberant city is more than just sunshine and beautiful scenery; it’s also a destination with solid investment potential for landlords hoping to take advantage of Dubai’s unique investment opportunities.

Visitors and expatriates are relocating to the city, which means plenty of prospective tenants are looking for all styles and standards of accommodation, with demand propelling the housing market, making right now the best time to invest.

Dubai: High rental yields for investors 

The rental yield is one of the most critical elements in property investment. It’s paramount that a rental investment will generate enough income flow to meet and exceed any expenses of the investment and provide a decent return.

As reported by Zoopla, who appear to be very positive, the rental yield for a buy-to-let property in the UK averages around 7.2%, with some areas in popular cities offering a higher percentage. Top real estate agents Baron and Cabot say New York yields are even less at 2-3%. 

According to Bayut, a renowned real estate platform, the average rental prices for properties in Dubai starts as follows:

• 1 bedroom: £11,000 per annum

• 2 bedroom: £16,500 per annum

• 3 bedroom: £21,500 per annum

Dubai rental properties offer a high rental yield of 5-9% and even 10-13% for some properties.

Rents are paid annually

In Dubai, tenants generally pay their rent annually or quarterly instead of monthly. Not only does this offer excellent up-front returns for investors, but it’s guaranteed income. Rental prices have been increasing month on month, with that trend set to continue; with such high demand in the rental market, it offers a lucrative option for investors. 

The index below comes from Dubai’s Land Department Residential Rental Performance PDF – February 2023, stating that prices have increased in Dubai as a whole by 3.36% in the last 6 months, laying out the increase in rents required for apartments at 3.64% and villas at a princely 6.40%.

There are plenty of potential tenants, too, with the population set to almost double by 2040. Government statistics say the population of Dubai stands at just under 3,700,000, with a population density of 762.6 individuals per square kilometer. 

According to the World Population Review, the overall expatriate population of Dubai is around 75%, roughly 2.72 million people, and this figure is increasing steadily year on year.

The population of the UAE is just under 9,400,000, meaning people living in Dubai make up just under 40% of the UAE’s total population. The figures change regularly, but the upward projections give a more profound understanding of why investing can be profitable.

Dubai Tax Incentives 

UAE is one of the few countries in the world that does not levy income tax on individuals, and that’s a significant reason people choose to live in Dubai. You can keep what you earn but just as in the UK, Value Added Tax (VAT) is levied on most goods and services.

No Inheritance Tax to Pay 

Another benefit, and one of the most significant investing points, is zero inheritance tax when you bequeath the property to beneficiaries. Meanwhile, in the UK, the standard Inheritance tax rate is 40% over the £325,000 threshold. In the US, federal estate tax is between 18-40% depending on assets and the state.

Cash gifts in the UK are also taxable if the gift giver dies within seven years of gifting. UAE does not have this rule; any gift given to you in Dubai is yours, and no tax is applicable.

Dubai: the fastest growth market

As we know it, Dubai is just half a century old; the emirate is in its infancy compared to regions such as London or New York, where the property markets have grown steadily for decades. Dubai’s widening real estate portfolio allows investors to capitalise on the early stages of the region’s growth which is why many are looking at buying an apartment in Dubai.

According to statistics published in Arabian Business, the UAE property market, particularly Dubai, saw record-breaking transaction numbers in recent years, with over 98,000 property transactions totalling over £58.42 billion. Dubai’s economy is strong and will likely grow by a predicted 2.5% cent, and house prices, it’s argued, could continue to rise by up to 25 per cent.  

The average sales price for properties in Dubai reached just under £712,000 in late 2023, marking a year-over-year (YOY) increase of 52% from August 2022. 

In Dubai, there is a solid long-term asset appreciation potential. Imagine the potential return for purchasing real estate in London or New York’s first 50 years of growth.

Increasing demand for off-plan 

For investors, off-plan properties can offer the highest return. An investment property in Dubai could provide the ideal solution for those looking to diversify an existing property portfolio or have a property-based financial goal.  

Landlords can take advantage of the off-plan benefits when purchasing properties in Dubai. Often, these include lower prices than completed developments, resale properties, or private sales, plus many developers tailor interest-free payment plans to secure early interest. Some off-plan units are delivered early, allowing the investor to rent them out before completion.

Higher capital appreciation is another positive – the nearer to completion, the higher the property’s value, meaning you can still make a significant profit even if you flip the property before the developers finish the property.

Flexible payment schemes in Dubai also mean more options to finance the purchase. Investors can sign up for a payment plan directly with the developer. Typically, these are interest-free payment plans spread over three to seven years, which often only require 50 per cent of the balance paid leading up to completion. The balance due on completion can be fulfilled with a mortgage successfully, even as a non-UAE resident.

Moreover, tenants moving to Dubai often favour new properties in recently improved areas with all the latest technology, eco ratings, and infrastructure, making an off-plan investment a wise investment.

Golf News reports that new property bias is not unique to Dubai; many first-time buyers or investors who may be nervous consider new builds a safe bet. However, knowledgeable investors and landlords know that new builds can come with their own issues that some older developments don’t have.

If we look at Palm Jumeirah, the artificial offshore islands built in 2001, as an example, its success has been built over time (22 years to be precise). Initially, some foreign investors were skeptical because the engineering technology was so new, and many thought the Palm would sink. 

Now, Palm Jumeirah is one of the most popular destinations in the world, considered the 8th wonder of the world; while the sea levels are rising thanks to global warming, the structure at the Palm Jumeirah is as safe as houses.

Dubai: Low or no fees for rentals

In the UK and the US, it’s typical for landlords to pay a fee of between 5 and 10% to the letting agent for the services they provide, such as finding a tenant and checking references and even more for property management, but in Dubai, there are usually no agency fees (0% to pay) on rental returns for landlords. Letting agent’s fees are applicable once tenants have been found but often, the tenant will pay any fees due to the agency – see the illustration below for additional information.

Courtesy of Bayut.com

In Dubai, landlords can use free listings, marketing support, and tenancy acquisition because the tenants pay the agent fees. However, government fees are applicable. Landlords must register rental agreements with RERA’s online portal, Ejari. 

Tenants also pay Dubai Municipality housing fees, which are 5% of the yearly rental charges. These housing fees are added to the monthly electricity and water bills.

If you sell the property, the Dubai Land Department (DLD) regulations apply much like the stamp duty payable in the UK—the fee is 4% of the property’s total price. DLD fees in Dubai are legally divided between the buyer and seller at 50% each.

However, the property buyer usually pays the fee because Dubai’s housing stock is in such demand.

Dubai’s Golden Visa

The golden visa is Dubai’s long-term residency visa, allowing foreigners to work, live, and study in the UAE. This sought-after visa comes with exclusive benefits for those who are eligible, including:

• Multiple entries allowed

• Can be renewed for up to 10 years

• Don’t need a sponsor

• Stay outside the UAE for more than 6 months without losing visa

• Sponsor family members, including spouse and children (no age limit)

• Sponsor unlimited domestic helpers

• Family can remain in UAE until end of permit duration, even if the primary visa holder dies

Those who are eligible to apply for a golden visa in Dubai include entrepreneurs, investors, scientists, graduates, frontline workers, humanitarian pioneers, and students.

To conclude 

Dubai has sun, sea, palm trees, and a fantastic desert landscape surrounding the city. It is a welcoming emirate city with a thriving but safe hospitality scene and a skyline that rivals any top ranking city worldwide. It is a destination with big ambitions and limitless investment opportunities supported by flawless leadership striving to be the best and most successful at everything it does. 

The economy is booming, and investing as a foreigner is easier than ever. Recent developments in the UAE, such as the Palm Jebel Ali, JVC, Arabian Ranches DAMAC Hills2, mean the world is watching. There’s an investment range, from a one-bedroom apartment to vast villas, so no matter your budget, there’s an investment possibility for you. If you’re lucky enough to have £1,580,000, you can even secure a Golden Visa, a residence visa that enables foreigners to live and work or study in the UAE long term.

In relative terms, Dubai is a fledgling city, and many enthusiasts will argue that it is at the start of its growth trajectory. And because Dubai is the wealthiest state in the world with a government body that supports landlords, your investment is in safe hands.