I get asked this question frequently by Investors so I have put together a brief summary of both markets.
Currently in Dubai 2019
- Buyers require a 25% deposit (if financed) and a 4% Dubai Land Department fees, 2% agency fees
- Developers are now providing more affordable payment plans for new builds, including post payment plans of up to 5 years
- Sales prices and rents started declined over 2018 and further into Q1 2019
Apartments – average declines of around 11% in rents and 8% in sale prices.
Villas – market declined 9% in sales and 7% in rents in 2018.
- Around 22,000 units were delivered during 2018 the highest in 5 years.
- A further 9,800 properties were completed in Q1 of 2019 with a further 50,000 still under construction.
United Kingdon 2019
- UK city house price inflation has slowed to 1.7% – the lowest growth since May 2012
- Sales volumes are now 13% lower than in 2016 in southern cities.
- Some areas, however, have seen strong growth over 2018/19 Manchester, Birmingham and Edinburgh.
Taxation
- Additional 3% stamp duty for second residences applies with a possible further 1% for foreign buyers
- Leasing a UK property (as an individual) – subject to income tax at their marginal tax rates – up to 45% on the rental profit, regardless of their UK residence status
- Inheritance Tax applies in all cases
- Non-resident CGT applicable on the gain from April 2015, the rate of tax = 28%, subject to annual exemption (£12,000) and the basic rate band (18% applicable)
Conclusion
Even though the UK has seen some growth in the past year or so, in my opinion, Dubai still remains a better investment due to no taxation, the higher net returns on investments – average 5-7% on apartments.
For example: (cash purchases)
Purchasing a 1 Bedroom in Dubai Marina – West Avenue, upgraded, 705 sq ft
Sale Price AED1,170,000
Initial one off Costs – agency fee, DLD, NOC etc circa AED76,700
Service charges per annum – AED12,578
Total year one costs AED1,259,278 (£262,349)
Rental Income AED85,000 (£17,708)
Net income: 6.7%
Purchasing a 1 bedroom apartment in Highbury, London, N5, 511 sqft (first property)
Sale Price £590,000
The initial one of Costs – Stamp Duty, lawyers etc circa £31,500
Service Charges per annum £350
Annual Tax circa £3,844 (any costs spent on the property can be offset)
Total year one cost £625,694 (AED3,003,331)
Rental Income £20,544 per annum (AED98,611)
Net income: .32%
As you can see from the above the rental income on both properties is around the same but for double the investment when buying in London.
Capital growth could potentially be seen faster in the UK as the market is mature whereas Dubai is a growing Emirate with construction and supply.
Laura Adams
Managing Director, Carlton Real Estate
contributions by Hannah Greenwood, Finsbury Associates