Why HNWIs Invest in the UAE’s Property Market

Over the past few decades, the UAE has flourished due to its tax-efficient ecosystem, high-income economy, premier healthcare system, prestige as a leading regional business hub, world-class lifestyle amenities, and outstanding international schools. These factors have drawn HNWIs from all over the world who are enticed to explore the opportunities offered by the property market in the UAE.

Overview of the UAE’s Property Market

Overall, the Land Department’s data shows a striking disparity when comparing the second quarters of 2022 and 2021: the market saw a rise in the value of 61% and an increase in sales volume of 45% in 2022.

Most investors engaging in the property market of the UAE concentrate on Dubai, and during the first half of 2022, over 43,000 real estate transactions were completed, totalling Dh115 billion. Compared to the previous year’s first half, these astonishing numbers indicate a rise of up to 87 %. Particularly, June 2022 was a record-setting month with approximately 8,900 sales transactions, as the total reported value of these transactions was Dh22.75 billion. Abu Dhabi and Sharjah also recorded Dh22.38 billion and Dh11.2 billion in real estate transactions during the first half of 2022, respectively.

Due to the UAE’s comparatively high-yielding residential property market and the city being a critical global tourism destination, there is significant investment potential for those purchasing properties to explore the long- and short-term letting markets.

Why are HNWIs Flowing to the UAE?

HNWIs who are interested in making investments are drawn to the emirate because of its political and economic stability, its brisk and uncomplicated company registration procedures, its diverse array of emerging industries, its exceptional living standards, and its impressive internal infrastructure.

Even though the oil and gas industries, the gold market, and the financial sector continue to be the most developed pathways offering prospects for investment, the country’s burgeoning real estate market is still a very appealing and worthwhile investment choice.

Recently, the UAE has become a hotspot for a large influx of HNWIs, with an estimated 4,000 millionaires relocating this year. The prediction indicates that the UAE’s financial wealth will surpass $1 trillion in 2022, growing at a pace of 6.7% per year.

Financial Attractiveness – a Core Pillar of the UAE’s Appeal

Because there is no personal income tax, corporate income tax, capital gains tax, or wealth tax in Dubai, this city is a desirable destination for anyone who wants to make the most of their earnings and revenue. Hence, Dubai has become an attractive location for HNWIs who, under normal circumstances, would be subject to higher tax rates.

Because of the absence of a personal income tax in Dubai, the emirate is becoming an increasingly attractive location for company owners and skilled professionals who are looking to maximise the profit they get from their operations. Even though in 2018 the government implemented a VAT charge of 5%, the country has far more favourable tax policies than the great majority of other cities throughout the globe that are similar.

Advantageous Legal Framework

New legislation encouraging the development of property market investment funds in the emirate of Dubai was passed into law in July 2022 by the city of Dubai. In the pursuit to reinforce the emirate’s stance as a “global destination for real estate investment” and to offer incentives to bring more funds to the UAE, Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, promulgated a decree that grants specific privileges to real estate investment funds.

According to the recent law, the legislation would incentivise international real estate funds to carry out their investment operations in Dubai. Besides, the rule will encourage funds to participate in a variety of real estate projects located inside the emirate.

In addition, the recent attempt by authorities to introduce more openness to the real estate industry has resulted in purchasers having access to open real estate data in larger quantities than ever before. This development has been a recent positive contributor to the continued strength of the housing market.

Another appealing aspect for HNWI is the legal structure governing partnerships in the United Arab Emirates is rapidly changing, with a greater emphasis on protecting property owners’ interests. Regarding the property rights of non-citizens, freehold and rent zones have been established so that non-citizens may achieve full ownership of the real estate.

Bottom Line

To date, the UAE has gained worldwide attention, and HNWIs have started to further explore its commercial opportunities and property investments.

Falcon Global Capital have navigated through a dynamic real estate landscape, continually evolving their strategy to deliver high returns and sustainable investment. They provide years of specialist knowledge and experience to drive sustainable value, which has allowed them to sustain a competitive advantage in the market. To find out more about how Falcon Global Capital can help manage and leverage your real estate investment, please contact them at info@falcongc.ae.

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