Dubai’s demand for investment properties is soaring and is topping every luxury buyer and investor list this year. Investing in Dubai can be a bit different from other global markets. For example, you have to consider whether an investment in villas in the UAE is appropriate for you or if you should buy a townhouse in Dubai.
Why Invest in Dubai in 2023?
Dubai is already topping lists for the potential best luxury real estate markets in the world this year. A recent ranking of the top markets for luxury real estate by Knight Frank found Dubai was the best place for investors, with prices expected to increase 13.5% this year.
The past year has brought an influx of investors and wealthy residents to Dubai, with sales volume increasing in October 2022 by 73% compared to the previous year.
Property prices in Dubai were up 20-40% over the past 12 months, with some regions of the city seeing an even more considerable increase. For example, Palm Jumeirah grew by 59% and Trade Center First by 210%.
In terms of rentals, the cost went up at least 25% in 2022. Rising rent prices have piqued the interest of global investors.
Dubai has recently seen one of the most significant inflows of the private wealth of any other city in the world.
Analysts believe Dubai will remain appealing to foreign buyers who want to protect their assets, and its position will only get stronger with the growing energy crisis and instability geopolitically. Dubai is set to see even more property demand growth throughout this year.
What Investors Should Know About Buying Property in Dubai
If you’re an investor considering buying villas in Dubai or a townhouse in Dubai, the first thing to know is that the city boasts some of the most attractive rental yields anywhere in the world.
On average, investors see gross yields on rentals of around 5-9%, and the tax conditions are also very favourable to investors. There are no property taxes; for example, the UAE is a tax-free investment country.
Under new visa laws, investors can obtain a residence visa. If you invest in a property valued above AED 1 million, you may be eligible for a 2-year residency visa. For a property valued above AED 5 million, your eligibility goes up to a 5-year residency visa. Investors buying properties valued at AED 10 million may be eligible to get a 10-year residency visa.
The inventory and tax-friendly environment are paired with Dubai being one of the world’s safest cities.
How Do Villas and Townhouses Compare in Dubai?
In Dubai, there are a few general types of properties. There are apartments, and then there are townhouses and villas.
A townhouse usually shares at least one other wall with another unit. Townhouses are set in low-rise buildings on a smaller properties. Townhouses are a less expensive option, and they’re often located in busier parts of the city. Communities like The Springs and Reem usually have more townhouse options than villas.
A townhouse will have more shared amenities, and there may be limited indoor parking options.
A villa is a more private, detached home. While townhouses tend to share a lot of similarities with one another, villas are all very unique regarding price, size, layout, and amenities.
Villas don’t have shared walls, so if privacy is a top concern, this will be the better option. A villa is likely to have a garden and backyard.
Communities in Dubai with a large concentration of villas include Al Barsha, Jumeirah, and Arabian Ranches.
Since villas offer more space and expansive floorplans than a townhome, you have to factor in this, which could mean you need to budget more for maintenance.
The Pros and Cons If you Buy a Townhouse in Dubai
If you buy a townhouse in Dubai, benefits include the fact that you may be able to find something very close to the centre city. For renters, the location might be their number one priority. The owners often share the community maintenance costs, and the expenses of things like water and electricity will be less for a townhouse.
The lack of space and privacy are two downsides to buying a townhouse in Dubai.
Townhomes will always be in demand, particularly for singles and couples. They might also be preferred by renters who want to be close to city amenities and their employers.
The Pros and Cons of Buying Villas in Dubai
Villas offer the additional square footage that a family might seek, and a private garden adds even more living space. A sense of freedom to make decisions about your home and lifestyle comes with living in a villa. Villas are likely to be in a quieter environment, away from the city centre.
A villa will cost more initially, which is a possible downside from an investor’s perspective.
Investing in a villa as a rental will appeal to families with children and pets, and people who want quiet and privacy. A villa allows you to live in it personally if you choose, rent it to earn passive income, or use it as a country vacation home rental.
A family-oriented rental will also be a good option for an investor who wants long-term returns and doesn’t want to deal with the constant shuffle of tenants. For an investor with a long-term outlook, the land value associated with buying a villa is also something to consider since it will appreciate over time, increasing the overall value of your villa.
The long-term value of land is significant to consider in a city as thriving and popular as Dubai, which is posed for significant long-term growth.
Which Option is the Best Investment?
Both a townhouse and a villa can be excellent investment opportunities in Dubai. Your decision will rely quite a bit on your specific objectives as an investor.
Do you want to buy a home where you’ll live before selling it for a profit? Are you interested in a property as a short-term or a long-term rental? How important is the location for you? What is your investment timeline?
These are all factors to consider. There’s not one option that’s better than the other, and it depends on your goals.
We also recommend, especially if you’re a foreign investor, that you work with a regulated real estate agent to connect with the most in-demand properties, including townhomes and villas, and avoid potential scams.