There are many articles online that will tell you to buy property in Dubai Market, but you will hardly find any article on why you should not buy property in Dubai when investors can opt for other markets like Hyderabad in India and Shanghai in Japan.
Here are Top Three reasons you should not buy property in Dubai.
1. Oversupply Problem
The population of Dubai is only about two million. In contrast, that is about the size of Penang, Malaysia, or Austin, Texas.
Looking at Downtown Dubai’s impressive skyline, which is made up of literally hundreds of high-rise office buildings and residential properties, may come as a huge surprise to someone unfamiliar with Dubai or its demographics. But many of them are essentially empty.
Office occupancy rates in Dubai are on the higher end of the range, with residential occupancy rates currently hovering between 30% and 40%. Even worse are hotel apartments.
The low relative prices of real estate in Dubai is largely due to the city’s low occupancy rates. Only roughly US$5,000 per square meter (or $250 per square foot) is spent on real estate in desirable areas like Dubai Marina and Dubai Internet City.
2. Rising Political Tensions
Though it doesn’t say much, one of the Middle East’s most prosperous and stable regions is the Persian Gulf. As a result of the Gulf’s apparent newfound stability, property values throughout the region—from Dubai to Qatar—have skyrocketed. But remember not to take it for granted.
The Gulf hasn’t always been in a peaceful state historically. Recently, tensions have also increased. As Saudi Arabia and the UAE compete with Qatar and Iran for influence, geopolitical theater is being played out in the area. Another wild card is still a variety of militant groups. It’s safe to assume that things won’t get any better when Israel is involved.
3. High Maintenance and Service Expense
In Dubai, owning a property frequently entails recurring expenses, such as upkeep fees and service fees for community facilities.
Even if an investor wants to invest then in order to prevent any unforeseen financial hardships, investors must carefully read the terms and conditions pertaining to these fees.
A positive approach would include accounting for these expenses in the overall investment plan and acknowledging that properties with proper upkeep typically provide higher long-term returns.
In order to lower your risk when investing in Dubai real estate, also take a look at these suggestions for improving overall efficiency and lowering property management expenses.
