Investing in Dubai Real Estate: Apartments vs Villas

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Dubai is an excellent market for real estate investment. Since 2021, Dubai property prices have steadily climbed, exhibiting double-digit growth rates. Off-plan property sales have also grown higher than anticipated.

This 2024, Dubai residential real estate prices are expected to increase by five to seven percent. While this is lower than the growth the market has experienced in the last few years, it’s still a win.

The slowdown can mean lower purchase prices for investors; thus, buying Palm Jumeirah villas or Dubai Marina apartments may cost less than anticipated.

Since property prices in Dubai are proven to cycle between periods of rapid, intense growth and slowdowns, you can look forward to higher revenues and residual earnings in the future. Capital appreciation is also reasonably certain.

Why Invest in Dubai Real Estate

Dubai real estate is forecasted to show steady and stable growth. S&P Global Ratings, in its sector review of the Dubai property market, attributes this to high overseas demand, the dynamic nature of the Dubai economy, sector buoyancy, and population growth.

High Demand Among Foreigners

A primary driver of the real estate surge in Dubai is the high demand from foreign or expat investors. Dubai allows 100% foreign ownership of properties in designated freehold areas. In other words, foreigners can buy and absolutely own freehold properties in Dubai.

Additionally, foreigners investing at least AED 750,000 in qualified freehold real estate in Dubai may even use their purchase as a basis for applying for a two-year, renewable residence visa under the Taskeen program. The principal applicant may sponsor their spouse and children, and the property owner (and their sponsored family members) can study, work, and live in Dubai.

No wonder high-net-worth foreign nationals consider purchasing Dubai real estate an excellent investment opportunity. By buying property in Dubai and meeting the minimum investment amount requirement, they can realize gains from Dubai’s booming property market, activate rental income, gain unlimited entry into the UAE, and even live and work in Dubai.

A Dynamic Economy

Dubai’s diversified economy has contributed greatly to its resiliency. It grew an average of five percent in the 2021-2022 period. While it is not exempt from the inflation woes currently afflicting the globe, its inflation rate is below the world average.

The Dubai economy is predicted to grow by three percent in the coming year. It will be stable, owing to excellent fiscal policies and a decreasing debt burden relative to GDP.

Consistent Demand From Other Sectors

The strong growth momentum expected from the hospitality, financial services, wholesale, and retail sectors has a positive effect on the real estate market. Expectations in these sectors are keeping property demands up.

Growing Population

The Dubai population is growing, and the number of international visitors continues to rise.

Millions of new residents need apartments and villas, while visitors need hotel rooms and other transient accommodation options.

Villas or Apartments?

Dubai essentially offers two main types of properties: apartments and villas.

Apartments

An apartment in Dubai typically refers to a residential unit within a building. Think condominium units, where apartment owners share the use and upkeep of common areas with others. Shared amenities can include swimming pools, gyms, security services, retail shops, cafés and restaurants, and open spaces with children’s playgrounds, parks and BBQ spots.

Apartment buildings can range from low-rise structures to high-rises or skyscrapers. Apartments vary in size and style, offering options from studio apartments to multi-bedroom units.

Villas

Villas are standalone houses ranging from modest 2-bedroom homes to luxurious multi-bedroom properties. Often located in gated communities, they offer greater privacy and space than apartments, featuring individual plots, gardens, covered or private parking, and sometimes private pools.

Actually, there are also townhouses and duplexes in Dubai. Like villas, they offer more privacy than apartments. They’re not identical to villas, but for the purposes of this discussion, villas, townhouses and duplexes are all lumped together.

Townhouses are properties (typically multi-story with a terrace) that share one or more walls with adjoining townhouses. Duplexes are groups of two adjoining townhouses; each half of a duplex shares only one wall with another property.

The Advantages of Investing in an Apartment

Apartments can be a good investment offering the following benefits:

High rental yield: Apartments generally offer higher rental yields than villas. Their lower price point and (typically) highly urban location can make them more in-demand and accessible to tenants.
Affordability: Apartments cost less than villas, allowing investors to enter the Dubai real estate market more easily or even own multiple units.
Broad market: Apartments cater to a young and mobile demographic. Incidentally, this corresponds to the majority of Dubai residents. A 2021 report by Dubai Statistics Center indicates almost 58.49% of Dubai residents are between 25 and 44 years old.
Distributed maintenance costs: Homeowners associations are in charge of maintaining shared spaces and amenities in apartments. This divides the cost of maintenance across multiple units.
Easier resale: The relative affordability of apartments (plus the other benefits stated above) makes apartments easier to sell than villas.

The Advantages of Investing in a Villa

For all the advantages of apartments, some investors prefer to invest in villas which offer the following distinct benefits:

Capital appreciation potential: Villas can appreciate more significantly, especially in established or up-and-coming upscale neighborhoods.
Long-term rental income potential: Villas attract families and other long-term family tenants, potentially leading to more stable rental income.
Higher rent: While their investment yield may be lower, villas offer higher absolute rental incomes. They’re bigger and provide more space and privacy, for which tenants are willing to pay a premium.
Customization and upgrades: Since villas are standalone properties, their owners can do more with them than with apartments. Stock villas may be customized, improved and modified to enhance their value.
Land ownership: Villas come with land ownership. Owning land can offer additional security and potential for appreciation.

Invest in Dubai Real Estate

The Dubai property market continues to grow and remains one of the most attractive real estate investment destinations globally.

High-net-worth individuals continue to flock to Dubai, investing in villas and apartments for rental income, capital appreciation, 100% foreign ownership, and residence visa privileges.