Dubai is continuing to grow at exponential rates, with the city being home to more than three million people as of 2019. The luxury real estate market in Dubai has also been growing as prices continue to rise. But even with those prices going up, Dubai is still affordable when compared with other markets.
Real estate prices will keep rising in 2023, especially as home values have increase by 50 percent in 2022. Prime residential properties average around $800 per square foot.
While the value might seem high to some, the total is still less than what people would find in other markets. For example, it costs nearly $2,000 per square foot for a property in London or Sydney, plus it costs about $2,500 per square foot for a home in New York City.
Estimates also suggest that prices in Dubai will increase by about 13 percent in 2023. Miami has the closest increase, but that city’s prices are only expected to go up to 5 percent. This statistic shows a strong interest in Dubai’s real estate market.
The relative affordability of homes in Dubai has made it an exciting market. The 2021 calendar year saw $35 billion in property transactions, with many of these being in luxurious gated communities throughout the Dubai area.
But why is Dubai expected to continue to grow in 2023? There are many reasons why Dubai will continue to be an exciting luxury real estate market in the coming year. The market will keep rising thanks to international interest, and a new tax likely isn’t going to make as much of an impact as people might expect.
Rentals Are More Valuable
Rental costs for properties in Dubai are continuing to rise, making these properties more viable to investors. Estimates suggest the average cost to rent a property in Dubai has risen by at least 25 percent in 2022. An average apartment in Dubai has an annual rental rate of about AED 90,000 or $24,500, for example.
The increasing rise in rental charges has helped people become more interested in investing in real estate properties in Dubai. Since it’s easier for investors to get a return on their initial work through these rising rental fees, people will be more willing to invest in the area.
Easier to Handle Assets
One reason why Dubai will continue to grow in popularity in 2023 comes from how Dubai is a safe haven for many international investors. Dubai will take in investors who might be subject to sanctions or punishments for smuggling money or other crimes.
This point is especially valid for Russians, as the United Arab Emirates has not sanctioned Russia for its ongoing invasion of Ukraine. Russian investors who want to enter Dubai will not risk the seizure of assets. They will not be subject to significant restrictions on what they can do or invest in while in Dubai. Therefore, expect more Russians to invest in properties in Dubai, as it is one of the few places where they are still welcome to do business.
A Strong Pandemic Response
While many parts of the world have been struggling to recover from the global pandemic, the UAE has been much more successful. The UAE had a faster and more comprehensive approach to managing the pandemic than many other countries. The country used extensive control measures and developed many technologies and devices to help treat patients. Many of the resources produced in the UAE were shipped to other countries that require additional help.
The UAE was more productive during the pandemic and had an easier time adapting to this new normal. It is no surprise Dubai and other parts of the country were faster to get back to normal than other places. This factor has helped make Dubai a more appealing market to many, which is especially notable when ongoing struggles in China come into play.
Will a New Tax Impact Things?
There will be a new tax introduced in the UAE in June 2023, as businesses will be subject to a 9 percent corporate tax for earnings above AED 375,000 or about $102,000. Businesses will not pay corporate taxes if they earn less each year.
But while this tax might be concerning to some businesses, that tax likely won’t hurt the Dubai real estate market. There is still a 5 percent VAT for businesses earning more than AED 375,000, and this has not created a negative impact on the local economy. But businesses considered “harmful” by the UAE government still have to pay taxes of at least 50%, with companies that create products containing sugar being the most likely to pay these taxes.
Individuals still won’t have to pay income taxes in Dubai, so they will still have more money to help pay for real estate properties. The UAE is unique, as it is one of only a few countries where people pay no income taxes.
What About China?
China’s economy is slowing down, and the poor handling of the global pandemic is a concern. People around China might flock to other markets to avoid severe lockdown restrictions or an increased risk of a condition spreading quickly. Expect homes in Dubai to become more appealing with more people from China getting in on the area.
The Chinese economy is also expected to contract at the start of 2023. While there’s a belief it will grow, it is hard to predict what will happen.
What Real Estate Will Be Available?
The exciting thing about the Dubai real estate market is that it is still growing in popularity. Investors can find various exciting spaces in Dubai, including properties in gated communities, country clubs, and apartments in the city’s centre.
People can also find these properties in many neighbourhoods around Dubai, including Dubai Hills Estate, Palm Jumeirah, Dubai Creek Harbour, and the Emaar Beachfront. More options will likely be available as the Dubai market continues to grow.