United Arab Emirates: Overview

RENTAL YIELDS

Yields are good in Dubai

Yields in Dubai can reach up to 10.2% for small apartments of 50 square metres (sq. m). Bigger apartments tend to generate lower yields, with 6.88% for 250-sq. m apartments. On the average, Dubai apartments have yields of around 7.9%.

Apartment prices reach up to US$897,000 for 250-sq. m apartments, and average around US$3,900 per sq. m. Smaller apartments have higher per sq. m prices, at US$4,128 for 50 sq. m. Rent prices per sq. m are higher than bigger apartments as well.

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TAXES AND COSTS

Rental income tax is low in Dubai

Effective Tax Rate on Rental Income
Monthly Income	€1,500	€6,000	€12,000
Tax Rate	nil	nil	nil
Click here to see a worked example
Source: Disclaimer

Rental Income: There is no income tax, but that is slightly misleading, as there is a 10% tax on residential leases, assessed on the rental income.

Capital Gains: There is no capital gains taxation in Dubai.

Inheritance: The thorny issue of inheritance has caused a lot of debate. It is hoped that the position will be clearer once the new Land Law is enacted.

Residents: The Residents' visa renewal fee is $1,360 every three years per person.

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BUYING GUIDE

Total transaction costs are very low in Dubai

Total round-trip costs are around 3%-7%. There are no property-related taxes in Dubai, which accounts for the low transaction costs. There is only the 2% registration fee and real estate agent's commission (1%-5%).

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LANDLORD AND TENANT

The Rent Law handicaps landlords

Under a Rent Law introduced in 2005, which applies to all the UAE states, rent increases were capped initially at 15% by a Rent Committee. In December 2007, the government announced that rent increases would be capped at 5% in 2008 from the previous 7%. Disputes go to local Rent Committees.

Complaints to the Rent Disputes Committee have been frequent in Abu Dhabi, which suffers from a severe housing shortage. Landlords who want to increase the rent are claiming that they are demolishing or renovating the apartment, or claiming they are moving in relatives.

The 5% increase can be exercised only on agreements that are renewed in 2008. However, some legal experts say that rents that went up by any amount in 2007 cannot be increased further in 2008, nor can tenancy agreements that were signed for the first time in 2007. Exactly how the law operates is still somewhat unclear. "There are circumstances where no increase at all will be permitted and other cases where increases of more than seven per cent are allowed," the Gulf News recently quoted Lisa Dale, head of property at legal consultants Al Tamimi & Company, as saying.

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ECONOMIC GROWTH

Dubai: Leading the way for development

The UAE’s present prosperity began in the early 1970s, after the changes in world oil prices. In 1971 the UAE was established as a federation, and in 1973 the economies achieved monetary union with a common currency, the Dirham. However economic growth has not been smooth, despite the enormous reserves of wealth at Dubai’s disposal.

Between 1972 and 1998 real GDP grew by around 4 times, after inflation. However growth was violently unstable, with large slumps (-19% in 1986) and large growth spurts (+16% in both 1989 and 1990. However on balance growth has been strong, with an average growth rate of 6.5% between 1972 and 1998, and similar growth since then.

However, the picture is much less good for GDP per capita, which has been more or less continuously falling. This is explicable by the large increase in the population. The UAE’s economy is very unusual in that 91% of the workers are expatriates.

There is a dark underside to this boom – appalling working conditions for labourers, terrible housing, indentured contracts and deprivation of pay. The government has responded to signs of labour unrest, which have been growing despite the repressive political environment, with legislation mandating a minimum wage.

The UAE’s economy is extremely open and dynamic, a real hub of trade and enterprise. The non-oil economy has grown rapidly, although oil remains the core. There has been considerable diversification into non-oil export sectors such as electronics, light machinery and transport equipment driven by a series of Free Trade Zones such as the Jebel Ali Free Trade Zone in Dubai.

Dubai has also embraced international arbitration procedures, and is one of the least difficult places in the world to hire and fire workers. Dubai is also a major re-export centre for the whole region. Tourism has also grown rapidly.

Service industries have grown fast with free trade zones in IT and the media. Dubai Media City and its counterparts offer two key advantages: tax benefits and freedom of speech. Major media organizations - including Reuters and Sony - and publishers, artists and writers have moved in. Established satellite broadcaster MBC relocated to Dubai Media City from London.