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Find the right approach for your UAE property investment

Dubai Skyline Aerial View
Michael Lane, Managing Director at Swiss International Legal Consultants Ltd, part of Swiss Group delves into the UAE’s property market over the last few months, homing in on what to know before investing in the UAE property market.

Dubai’s real estate market is certainly buoyant, with record transactions in Q1 2022. The emirate recorded an incredible 25,972 transactions between January and March - the highest number of deals since 2010 registered in a single quarter. The figure also marks the highest volume of transactions recorded since Q1 2014. Sales deals worth AED55.51 billion were logged during the period, according to Mo’asher, Dubai’s official sales and rental performance index.

RECORD BREAKING PROPERTY TRANSACTIONS IN DUBAI

March alone – the latest month for which figures are available – saw 8,399 sales transactions in Dubai, valued at AED22.58 billion - the largest volume of deals in the last seven years. Compared to March 2021, this represents an 83 per cent increase in total sales - and a 109 per cent increase in sales value. Some 60.16 per cent of total March sales were for secondary or ready properties.

Meanwhile, 8,616 off-plan properties (before the property is built and with only the plans available for inspection) were sold in Q1, worth a total of AED16.12 billion, and the secondary market transacted 11,923 properties worth Dh39.39 billion during the quarter.

The rental market remains stable, recording a 4% increase in the first quarter (compared to Q4 2021), with a total of 160,530 contracts, of which 51.89 per cent were new and 48.1 per cent renewals.

In cost terms, the overall quarterly index for sales saw a 1.251-point increase, with an index price of AED1,186,002. The apartment sales quarterly index posted a 1.26-point hike with an AED1,067,385 index price. And the villas and townhouses quarterly index registered a 1.234-point rise, with an index price of AED2,094,633.

And it’s a sign of a maturing market that Dubai Land Department (DLD) is now making all real estate data publicly available on its website, strengthening transparency in the real estate market.

UAE PROPERTY INVESTORS NEED TO CONSIDER THE OPTIONS

As experts suggest, 2022 will see a continuing growth curve – in both property sales and prices – it’s worth taking a moment to consider the array of property purchase options open to all. And of course, increasing property sales and prices are indicative of a growing economy. 

There are several things an investor must consider when buying a property. Firstly, it’s worth noting that a property can be purchased as an individual or as a UAE company. Which purchase structure you choose is important when planning the transaction and should be thoroughly evaluated to avoid any later complications or implications.

Registering a property in Dubai under a company provides an additional degree of confidentiality relating to ownership and can simplify inheritance issues. 

If you’re considering a real estate purchase as a business holding, creating a Special Purpose Vehicle (SPV) - specifically within the Abu Dhabi Global Market (ADGM) financial free zone under a common law legal regime - can be an ideal solution. 

An SPV is a passive (non-operational) holding company, established mainly to isolate financial and/or legal risk by ring-fencing certain assets and liabilities. While there has to be proof of a connection (i.e. Nexus) to the UAE or GCC, this can be demonstrated by assets already owned in the region, the shareholder being a UAE resident or by virtue of already having a business based here in the UAE. 

Creating an ADGM SPV is straightforward, however, we would suggest working with an expert to guide you through the setup proceedings keeping in mind that there are only a handful of licensed Corporate Service Providers within ADGM.

And with individual property ownership comes residency rights. If you make a property purchase of AED 750,000 in the Emirate of Dubai, you can apply for a three-year ‘property visa’, (where no more than 50% of the value is subject to a mortgage), or at least AED 750,000 needs to be paid to a bank.

THE GOLDEN VISA

As of September 2022, real estate investors can also now get a ten-year ‘golden visa’ if they buy a property in the UAE worth at least AED 2 million upfront or through a bank.

And what about inheritance matters? If you are looking to invest in UAE property as a non-Muslim, we recommend setting up a will through DIFC Wills Service Centre (formerly DIFC Wills & Probate Registry). Such a last will ensures that your UAE assets are distributed in accordance with your wishes, while opting out of the application of Shariah succession rules.

THE RISE OF THE METAVERSE FOR REAL ESTATE INVESTORS

As part of my role, I keep a close eye on economic developments and innovation and as such we have recently seen growth in virtual (metaverse-based) property purchases.  One of Dubai’s leading luxury real estate developers, DAMAC Properties, recently announced it will accept Bitcoin and Ethereum as payment, and the city eyes metaverse-based property opportunities. We expect to see demand for advice around this increase as move forward.

 

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