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Market timing is a matter where people have different points of view. The real estate agent you consulted in the UAE might advise you that now is the opportune time to buy property, while your relative who actually resides in Dubai may suggest waiting for more favorable market conditions.
How is the property market in the UAE currently?
Stability is a necessary condition when investing in real estate because it is crucial for long-term growth and profitability. It is an information you need as a foreigner looking to buy a property in the UAE.
You are probably already familiar with the fact that the UAE is known for its strong stability. The last Fragile State Index reported for this country is 39.1, which is an extraordinary number.
The United Arab Emirates has strong economic foundations due to its large oil reserves, and the government has invested heavily in infrastructure and social services, making it a relatively prosperous and stable nation. Additionally, the country has maintained good relations with its neighbors, allowing it to remain relatively secure and peaceful.
This country offers a stable ground for investment. Let’s proceed to assess the economic forecast.
As projected by the IMF, the UAE will end 2023 with a growth rate of 3.5%, which shows the country is on the right path. For 2024, the consensus estimate is 3.9%.
Besides that, the economy will keep growing since the UAE’s economy is expected to increase by 17.6% during the next 5 years, resulting in an average GDP growth rate of 3.5%.
The expected sustainable growth rate in the UAE provides investors with a good opportunity to benefit from the appreciation of real estate values in the country. This growth rate also ensures that the value of investments will remain stable over the long term.
Nonetheless, there are other indicators to watch.
The United Arab Emirates’ population is growing and getting (a bit) richer
Population growth and GDP per capita should be on your mind when you’re in the market for real estate because:
• a growing population means more people needing homes
• a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)
In the UAE, the average GDP per capita has changed by 3.8% over the last 5 years. Despite being minimal, there is still some observable growth. Furthermore, the Emirati population is growing (+8% in 5 years).
This means that, if you purchase a lavish villa in Dubai and rent it out, you will find that each year, you’ll attract more tenants with sufficient funds to cover the rent.
If you’re considering purchasing and renting it out, this trend is a good thing. Then, the demand for rentals is likely to go up in Emirati cities, such as Dubai, Abu Dhabi, or Sharjah in 2024.
Rental yields are extremely high in the UAE
To understand if a property investment can be financially rewarding, consider the expected rental yields.
It’s the annual rental income of a property divided by its price. For example, if a property in the United Arab Emirates is purchased for 1,500,000 AED and generates 90,000 AED in annual rental income, the rental yield would be 6%.
Rental properties in the UAE offer gross rental yields ranging from 8.2% and 10.9%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in the UAE.
It’s among the best in the world.
In the UAE, expect moderate inflationary effect
If you’re contemplating investing in a property, high inflation can offer several advantages:
• Property values have a tendency to increase over time, potentially leading to capital appreciation.
• Inflation can result in higher rental rates, thereby increasing the cash flow from the property.
• Inflation reduces the real value of debt, making mortgage payments more affordable.
• Real estate can act as a hedge against inflation, effectively preserving the value of the investment.
• Diversifying into real estate provides stability during inflationary periods.
Based on the IMF’s outlook, over the next 5 years, the UAE will have an inflation rate of 10.8%, which gives us an average yearly increase of 2.2%.
This data is telling us that the UAE could face inflation in the near future, which would lead to an increase in prices. Consequently, purchasing a property could become more expensive. However, if you buy now, there is a chance that your investment will appreciate, allowing you to sell it at a higher value in the future.
Is it a good time to buy real estate in the UAE then?
Let’s wrap things up!
Looking ahead to 2024, purchasing property in the United Arab Emirates (UAE) presents a compelling opportunity, driven by a combination of favorable factors. The UAE stands out as an exceptionally stable country, providing a secure environment for property investment. This stability minimizes risks and contributes to a favorable investment climate, increasing investor confidence in the real estate market.
The UAE’s robust economic growth forecasts for the next five years reinforce its attractiveness as a property investment destination. The anticipated expansion of the economy suggests potential for property values to appreciate, offering investors the prospect of capital gains over time. Additionally, the UAE’s growing population, accompanied by an incremental improvement in wealth, can drive demand for housing and real estate, potentially leading to increased property values.
One of the standout advantages for property investors in the UAE is the extremely high rental yields. The combination of demand for rental properties and the relatively high cost of living makes rental income a lucrative avenue for investors. This can result in a steady stream of income, enhancing the overall appeal of property investment in the region.
Amid these positive indicators, it’s worth noting that moderate inflationary effects are expected in the UAE. While inflation can impact purchasing power, the country’s stable economic growth, growing population, and high rental yields could counterbalance this effect, potentially safeguarding the value of property investments.
In conclusion, 2024 holds promise for property investment in the UAE, with its stability, growth prospects, rising population, and exceptional rental yields making a strong case for potential investors. Careful consideration of these factors in light of individual investment goals is essential to make informed decisions that align with financial strategies.
We genuinely hope this article has been helpful and informative to you!. If you need to know more, you can check our our pack of documents related to the real estate market in the UAE.
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