Property Investment Opportunity in Dubai

Looking to invest overseas but just don’t know where to start? Have a look at Dubai, a great place to start your overseas investment portfolio.

Dazzling Dubai – the numbers

  • 18% average growth in property prices last year (rental yields also reached 18%)
  • 280km2 the area that will be covered by Dubailand, a forthcoming tourist resort and theme park, making it larger than Disneyland and Disneyworld combined
  • 700m the height of Burj Dubai, which will be the world’s tallest building when completed in 2008
  • 11,000 the number of new businesses that have opened in Dubai in the last year, including Microsoft, Nokia and CNN
  • 4,000,000 Dubai’s expected population in 2010
  • 500,000 new homes needed in the next 10 years

DINKS main buyers in Dubai

The data from GulfTalent.com indicates a large proportion of expats living in Dubai are young professionals – either single or married. This would suggest to investors that one- or two-bedroom luxury apartments, especially those close to the marina, might be the best way to go.

Too good to be true?

Potential glut

Such rampant and rapid construction as Dubai is currently experiencing makes it easier for a mismatch between supply and demand in the market to occur. The worst-case scenario for the overseas investor is an overabundance of property developing, which could then see prices trend downwards.

Inflation

Prices seem to rise almost as fast as the buildings, and according to Damian Harrington, associate director of international real estate firm CB Richard Ellis, the biggest risk that will face Dubai in the future is inflation.

Higher deposit

“While Dubai offers strong returns and growth potential for investors, there is generally a higher deposit you need to pay for off-the-plan developments compared to what you’d pay in Australia,” Harrington says.

Where to invest

  1. Dubai Marina. Jamie Andrew of Dubai Select believes the Dubai Marina will provide both residential and commercial investors with sound long-term returns. The reason for this, he says, is that the Dubai Marina will attract holidaymakers and residents alike and will become the hub of Dubai. A small unit on the Dubai Marina costs approximately $290,000.
  2. The Palm, Jumeirah will provide commercial as well as residential opportunities for investors. The 5km-long man-made, palm-shaped island will consist of around 2,500 villas, a further 2,500 apartments as well as shops, restaurants, bars and retail stores. Prices for apartments can be anywhere between US$180,000 and US$2m, while villas can reach US$10m.
  3. The Dubai Waterfront consists of several different areas and will be the largest man-made waterfront in the world upon completion. Prices vary depending on which area of the waterfront you buy in.
  4. A series of loft apartments, currently being developed, are going off the plan for between US$210,000 and US$1.2m.
  5. Old Town is located in Downtown Dubai inland from the waterfront. The world’s tallest tower, the Burj Dubai, will house several residential apartments as well as restaurants. In total, Old Town will house 1,300 residential apartments with one-bedrooms starting at US$300,000 and the larger three- or four-bedroom apartments going for close to US$1m.

Fees and taxes

Taxes in Dubai

  • Transfer tax: There are two taxes here: the first is a tax if you buy off the plan which is known as IVA. The other (ITP) is a tax you pay on a resale of a property. Both of these taxes are 7%
  • Stamp duty: It currently rides at 1% regardless of the property’s cost and is payable only on the purchase of the property
  • Plus valia: This tax relates to the increase of the land cost since the last sale of the property. The tax is minimal, however, and only equates to a few hundred dollars

According to Greenfields Conveyancing Consultants, as a rule of thumb you should add around 10% of the purchase price of the property to cover all foreign fees and taxes.

Australian taxes

Any income that’s incurred must be declared, even if it’s from overseas. Capital gains tax also applies; however, because you also have to pay a foreign tax on the property, you’re entitled to a foreign tax credit, which means that when you declare the capital gain in Australia you subtract the foreign tax that you’ve already paid.

Finance

Most banks and lenders will agree to finance a Dubai property so long as you use equity from a property in Australia. It cannot be a property in Dubai or in any country other than Australia. Once you do obtain a loan, you’re charged the same rate of interest.

Further information
Property in Dubai
Dubai Select www.dubaiselect.com
Homes Dubai www.homesdubai.com

General information
Dubai Government online www.dubai.ae
AME Info www.ameinfo.com

Destination Dubai – No mirage for investors

As the brash hub of the cash-rich Gulf region, Dubai is attracting increasing numbers of affluent professionals from overseas to drive its lightning growth. The fact that they need somewhere to live is great news for the property investorThe property market in Australia may have slowed down in the last couple of years, but it doesn’t mean that everywhere else in the world has as well. Swept along by the all-consuming tide of globalisation, property investors are increasingly looking at overseas options. And things don’t stop at the familiar destinations of New Zealand and Bali either. Take, for example, Dubai.

Economy

Nothing drives a property market quite like rapid economic expansion, and at 17% Dubai’s growth rate is four times faster than that of the US –it’s even twice as fast as China’s. Construction is underway on a massive scale, evidenced by the forest of cranes filling the city’s shimmering skyline.

With foresight, the Emirate of Dubai’s monied rulers are making sure they’re well prepared for the day the oil runs dry (quite soon). Tourism figures heavily in these plans, but so too does banking & finance, IT and other service industries. Megaprojects like the Dubai International Financial Centre, Dubailand and Downtown Dubai are part of a government-backed strategic development plan that intends to establish Dubai as the leading business location between the main European and Asian timezones and a fully functioning, diverse economy in its own right.

The draw for the property investor is not only that the economy is booming, but that it’s imported labour – from CEOs all the way down – that will drive the growth. With a local population of only 120,000 or so, Dubai’s future hinges on the influx of huge numbers of foreigners. Already 80% of Dubai’s population consists of expatriates from over 160 countries, of whom about 200,000 are in managerial positions.

So many people coming in from overseas needing to either rent or buy homes can only be good news for the property market. Consequently, an explosion of residential construction is underway, with developers struggling to keep up with demand.

Investor-friendly regime

So, how can an Australia-based investor get in on the game? The good news is that in its eagerness to diversify and grow, the Dubai Government has restricted as many obstacles as possible to foreign involvement. There are already 26 areas where freehold property has been made available (including villas and townhouses), allowing full expatriate ownership.

Dubai is inexpensive when compared to many of the world’s booming cities. Median values continue to rise despite having slowed a little in the past year. Rental returns currently sit at a very healthy 15%. According to Jamie Andrew of property specialist Dubai Select, now is the time to invest for long-term gains, as opposed to a few years ago when quick profits were made buying off the plan and selling a year later.

Tips for investing

  1. A significant amount of residential demand will come from young single professionals and couples moving in from overseas rather than families, so one- and two-bedroom apartments are often most in demand.
  2. It’s important to obtain proper legal advice when investing anywhere overseas. You’ll need someone who understands the law in Dubai so you can look after your property with the utmost efficiency and compliance.
  3. Villa versus apartments. Despite a decline in the demand for apartments recently, villas are still selling in strong numbers and demand remains high. In this respect, villa complexes, such as Old Town, would be ideal places to invest.

This article has been republished with permission from Your Investment Property magazine. Try our Loan Repayment Calculator and find the best repayment strategy for you.

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