Autumn 2023

Real Estate & Property
Reality of Luxury Realty

Unrivalled in its exclusivity, the UAE’s luxury real estate sector presents a compelling investment opportunity. Despite the growing interest in Dubai, the city remains the world’s most accessible luxury market, writes Ayman Youssef, Managing Director of Coldwell Banker
The real estate sector is a crucial driver of the UAE economy contributing to nearly 5.5% of the total GDP. While the expat population seems to be showing a growing interest in investing in properties in the UAE, the local residents are also claiming ownership of luxurious amenities and prime locations.

In a country that sails confidently on a stable economy complemented by a cosmopolitan lifestyle, investment in the UAE’s luxury real estate sector is a secure opportunity.

With its unmatched exclusivity, the luxury market in the UAE has become a magnet for investors from all corners of the world. The majestic city skylines and the breathtaking azure waters of the sea make it an enticing choice for both residential and commercial purposes. However, it is important for investors to remember that this market is fiercely competitive and constantly evolving, so it is crucial to consider certain key factors.

Why high-end property is the best investment choice?

Luxury real estate in the UAE has emerged as a highly desirable investment option, thanks to a range of factors. These include the availability of high-end properties, themed projects, and expansive commercial zones catering to exhibitions and mega-events.

The region's attractiveness as a destination for tourists, business representatives, expatriates, and industry professionals has further contributed to the profitability of luxury real estate. Additionally, the strategic location, robust infrastructure, and favourable tax policies of the UAE have played a significant role in boosting the investment potential of this sector. The introduction of the Free-Hold Law around two decades ago has also significantly contributed to the growth of luxury real estate as it allows expatriates to own properties with minimal restrictions. Furthermore, the region has achieved competitive rental returns in comparison to other Middle Eastern countries.

In the UAE, Dubai particularly has a decade-long ambitious plan known as D33 aiming at doubling the economy to make the city one of the top four global financial centres. Supportive government initiatives like the Golden Visa have also played a significant role in attracting investments in luxury real estate.

With average property prices rising 12.8% in Q1-2023 and villa prices increasing by nearly 15%, Dubai’s real estate market is expected to grow to over AED300 billion by the end of 2023.

Dubai alone has the capacity to carry this momentum with prices projected to rise by 13.5% to outpace global business hubs like Los Angeles, Paris, and Miami, to name a few. The UAE, overall, is attracting millionaires, accelerating the demand for the luxury segment.

Prime residential space in luxury addresses like Emirates Hills, Jumeirah Bay Island, and Palm Jumeirah is priced at $1 million for around 1,100 sq ft. This makes Dubai, and consequently the UAE, one of the world’s most affordable luxury markets as compared to other global hotspots. On the other hand, the limited supply of luxury properties is also causing prices to surge, making the available ones highly desirable. With several strategic plans in the pipeline, Dubai is expected to become one of the top 20 sought-after destinations in the world.

With a varied portfolio of investment options from buying and holding high-end properties to venturing into vacation rentals, luxury real estate works well as a calculated risk. Furthermore, as reigning real estate developers have plans for luxury projects, it is anticipated that prices will stabilise in the near future. This makes investing in the luxury real estate segment a highly lucrative opportunity.


Tips to avoid risks

Like every other investment opportunity, investing in luxury real estate also needs extensive research to alleviate risks. An in-depth check of the developers’ portfolio and track record along with a locality review helps understand the pricing viability and value in terms of long-term appreciation. Critically, analyse the clauses that buyers are expected to abide by. It is recommended to seek the help of a renowned real estate broker who can help further in understanding the locality’s potential development, amenities planned, and the neighbourhood in general.

Thoroughly understanding the legal framework is a must as the UAE has specific laws and regulations that govern the real estate segment. Ownership clauses, rights, taxes, and payout plans or financial options are clearly stated, however, to thoroughly understand the legal framework, seek professional legal advice to ensure compliance.

Always stay abreast with market trends given its dynamic nature and following economic indicators and regulatory changes aid in making informed decisions. 

While building a robust infrastructure for all businesses, the UAE has been extremely encouraging of innovation in technology including prop-tech. The emergence of property technology in the UAE is aiming at streamlining the processes associated with properties. By staying informed about the new-age developments in prop-tech, investors can assure themselves of a transparent and seamless experience when dealing with a luxury property investment.

One real estate investment lesson that the global economic slowdown and pandemic taught everyone is to identify a ready sale rather than relying on off-plan projects especially if it is going to be used as a residence or vacation rental. Off-plan projects carry the risk of delay in construction and handover, whereas a ready sale is free of such investment risk.


Globally renowned luxury areas to consider

Dubai Marina is celebrated for its scenic waterfront and iconic skyscrapers, making it a coveted location for luxury properties offering captivating views. Along with its stunning surroundings, residents can also enjoy excellent amenities, state-of-the-art infrastructure, and convenient proximity to leisure destinations.

Nothing about Dubai is complete without mentioning the Palm Jumeirah. Synonymous with luxury living, this man-made island offers an exclusive inventory of penthouses, apartments, and villas along with stunning views of the Arabian Gulf and Dubai’s skyline. With private beaches and world-class amenities, there isn’t another glamorous lifestyle that the Palm Jumeirah has to offer. This part of Dubai remains exclusive and tops the popularity charts amongst international buyers as well as tourists, assuring a safe investment option.

Who hasn’t heard about the towering Burj Khalifa? The world’s tallest skyscraper located in Downtown Dubai has also helped increase the value of residential and commercial projects in its vicinity. The demand for luxury residential spaces like penthouses and apartments remains constantly high to ensure higher rental yields and appreciation of investment.

While Dubai has its own charm, UAE’s capital Abu Dhabi also has a suite of luxury real estate investment options to offer in the popular Yas Island and Saadiyat Island. Investors favour luxury apartments at the waterfront and islands where Al Reem Island tops the list. The Al Raha Beach is also currently enjoying the millionaire-migration phenomenon, clearly showing one of the best stages for Abu Dhabi’s luxury real estate sector. 

Investing in luxury properties in the UAE can be a rewarding move when planned meticulously, bearing in mind the scope for appreciation and risks involved. With thorough research, challenges can be eliminated to arrive at a sound strategy backed by informed decision-making. Whether it’s the luxury apartments, penthouses, or villas, one key takeaway for investors is to be assured of long-term return on investment.  

© Al Hilal Group all rights reserved. Designed & Developed by North Star.