Buying Property in Dubai
Hi, Sunil here with a heated discussion on buying property in Dubai, the arguments for and against it.
I dont think I have to reiterate my personal views on investing in a property in Dubai again.
I am sure you have heard it enough.
But what I will attempt to do in this discussion is quickly point out the pros and cons on investing in Dubai real estate.
To give you a general idea of the demographics, Dubai has a population of about 1.7 million (as of 2009) of which 80% + are expatriates.
Buying property in Dubai has been made possible to expats since 2003 (as of 2009 at least).
- The most developed, stable and modern Emirate of the seven (as of 2009 at least).
- The biggest and best structures, entertainment facilities, restaurants (food from all over the world) and all kinds of beautiful shopping malls with every name brand you can think of.
- Cheap and available house help (drivers and maids are available and are reasonable)
- No discrimination against women (at least on the surface). They dont have to cover their heads. They can hang out and work in the same places as men.
- You can practice your religion in Dubai. Jews are not allowed however. Dubai is very tolerate of other religions, as long as you dont start a religious revolution against its own religion Islam.
- Tax free living no real estate, corporate or personal taxes. This is the single biggest reason expats find Dubai extremely desirable. Think about it, in the USA the effective tax rate (after putting together Federal, State, City, Social Security, etc) can be as high as 40%. That is just ridiculous. There is no sales tax either no matter what you buy! For as long as it remains a tax free haven, expect economic activity to increase and expats to continue to migrate to Dubai.
- So after reading some of the pros, who in their right mind would think twice before investing in Dubai properties right? I know I wouldnt but not because I dont think money cannot be made, but rather I personally believe the cons out weight the pros by a large margin. Now if I was a speculator, I might dump some money in and see how well it goes. For me, the USA is a good place to invest in real estate and has treated me very well over the years.
- Lack of political stability or rather there is no such thing as politics. Dubai is ruled by a single ruler, as is all other Emirates within the UAE. It has always been this way since the British left the UAE back in the 1970s. This is what I call a Sheikhdom, a one man ruled kingdom. Must be nice.
- Not a democracy the little man (you and I) have no voice. Laws and rules can change by the minute to whatever favors the Emirate / country at any time. Many long term residents of Dubai do not agree with many of the Emirates laws and plans for the future, however they cannot do anything about it. Dubai as such that if you like it then you stay, if you dont they you leave. There is no such thing as working toward the greater good for all in Dubai or any place rule by one authority.
- Neighboring resistance Dubai has broken all boundaries of its tradition and religion by taking strides toward modernity and liberalization (an adoption of the Western culture)! It is often said that Dubais main threat is not an external but rather an internal threat. I wonder why.
- Traffic, Congestion & Pollution - This is a huge problem. Dubais land mass isnt growing, so where is everyone going to fit? Increasing crowdedness, traffic jams, congestion and pollution will be an increasing problem if the population is not controlled by the authorities (there is a separate set of pros and cons to this). Public transportation will also have to be improved / started. The Metro should be done by 2009 2010, but I am afraid this is not enough.
- High end properties Development plans now and later are focused on high end properties, but most of Dubai is middle and low class. Who will move into these places? Rents are so high (and will continue to increase) that the middle and lower classes will be forced to move out. So what about all the property? We already saw severe affects of this during the 2008 housing market correction in Dubai. If Dubai forces the middle end to move out, who will run the Emirate? Certainly not the less than 20% locals right?
- Reverse Property Development Logic - Logic says you build to accommodate the demand. But Dubai has repeatedly created demand throughout history. The model is build and they will come to buy it. Spend up front building property in Dubai and expect investors to come and buy it later. Dubai is counting on its reputation as a big tourist attraction to lure in investors from all over the world. How long will this last? Wouldnt the number of investors run out? There wont be a population living in Dubai to sustain its economy, especially because there are no real estate taxes the sale of these properties will not generate recurring income for the Emirate. Then what? I guess that is why land is being built on water in Dubai right?
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So while there are tremendous pros and benefits to buying property in Dubai, I dont think it is my cup of coffee. I just dont agree with the fundamentals. I share this view with many, and equally as many oppose it. Whether this investment option suits you is a matter of personal opinion, risk appetite and your outlook of Dubais future.
You have to study Dubais long term strategic plan
in detail and decide for yourself where you stand on buying property in Dubai. Do you believe in the leadership? Do you believe in the plan, the vision and the likelihood of it coming to fruition? The economic crisis of 2008 certainly affected Dubais progress. Lets see what the long term future has in store.