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Is Dubai Real Estate Cheap?

Updated: Jun 11, 2023

Property prices in prime areas of Dubai, such as Downtown or Palm Jumeirah, increased by almost 50% in 2022 alone.

This is the biggest jump in property prices of any major city globally, in recent times.

Nonetheless, these statistics can be misleading, as they only address the prime neighborhoods of the city, particularly Downtown Dubai and Palm Jumeirah

Dubai has more than a hundred unique residential neighborhoods. And all of these have seen different property price developments.

Some neighborhoods have seen only slight price increases of 10-20% since 2019, while again other neighborhoods have seen no price increase at all.

In this article, we will cover Dubai’s complex house price developments and compare property prices in Dubai to other major cities.

Dubai property prices, despite recent increases, remain relatively low for international standards.

The Globalization and World Cities Research Network (GaWC) is a UK-based think tank that ranks the world’s most influential cities in terms of financial integration, physical trading activity, and cultural significance.

According to their ranking, Dubai is among the top 9 most influential cities.

The other 8 cities are New York, London and Paris, Beijing, Shanghai and Hong Kong as well as Tokyo and Singapore.

Let’s have a closer look at the property prices in these cities.

In Dubai, as of 2023, the average square meter of prime, centrally located real estate costs just 3,600 USD per square meter or 330 USD per square foot. In Dirham, that’s around 1,230 Dirham per square foot.

Those property prices are one-tenth of those in Hong Kong, the city with the world’s most expensive real estate.

Property prices in other global cities from London to Singapore are 5 times higher than in Dubai.

When property prices are high, rental yields tend to be poor.

Major Asian cities such as Hong Kong, Shanghai, and Beijing, for instance, have gross rental yields of below 2%.

Once you deduct building service charges, property management fees, and taxes, you end up with a net rental yield of less than 1%.

Dubai, with its much lower property prices, is enjoying healthy rental yields.

Gross rental returns hover around the 8% mark, with net rental yields reaching up to 5 or even 6%.

Why Are Rental Yields So Much Higher in Dubai?

In most global cities, property prices have risen at a much faster rate than rents.

Properties in major cities are primarily owned by the wealthy, and wealthy individuals have more financial resources to bid up property prices.

Individuals renting apartments and houses, on the other hand, tend to be on a relatively fixed salary income, and salaries have not increased that much over the last few decades.

Renters simply do not have the buying power to bid up rent prices.

As a result, over the last few decades, property prices in major cities have increased by much more than rents, in turn leading to lower rental yields.

In Dubai, however, property prices have never risen to the levels seen in London, New York or Hong Kong.

And therefore, rental yields remain highly competitive.

Is Dubai a good property investment location?

Imagine the average Dubai property market as a stock market index, for example, the S&P 500.

Just like the S&P 500 index is made up of many component stocks, so is the Dubai property market made up of many component properties.

And just like every stock in the S&P500 has a different dividend yield and price history, so do properties in Dubai.

Some properties in Dubai have seen incredible price growth, while other properties have barely changed in price since 2019.

Similarly, some properties have above-average net rental returns, while others have poor rental returns.

Every Dubai neighborhood offers different capital appreciation returns and rental yields.

Even in the same building, different units offer different returns.

Here at the Dubai Navigator, we help clients understand the Dubai property market and make sound investment decisions based on in-depth market analysis.

We never earn commissions and are 100% independent.


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