There is a new investment craze in town, at least for those that can afford it — owning an apartment in Dubai to cash in on the high rental returns in the United Arab Emirates city that is currently a global darling.
While for most people, a trip to Dubai is seen in terms of a vacation or at least a staycation once a year, a section of investment-savvy Kenyans have been building property portfolios in the investment and trading hub.
Those familiar with the market say that key among the reasons why investors are flocking to Dubai outside of high investment returns is because it has positioned itself as the trading and financial capital in the Middle East with all major brands having an office there.
Stable low-interest rate regimes for those who seek loans to buy the units are another plus. Other advantages of Dubai as a destination include a hustle-free entry and visa application process, flexible payment arrangements including rent-to-own options, and guarantees by the government that off-plan projects will be completed.
Jorim Amadi, a residential and commercial property leasing expert who has plied his trade at the business hub for almost a decade said that while previously Dubai was only popular among Nigerians and South Africans, the bug has shifted and now Kenyans—of local and of Somali decent, the Asian--and other East African community members have joined the bandwagon of the leading buyers of property units in Dubai.
“Information about Dubai property market started filtering in through the property expos. The expo is an annual fete that brings together multiple developers from the region and beyond, to showcase their latest property offerings,” said Mr Amadi.
“The flexible financing options, the high demand for certain types of units and the good rental returns has made Dubai become an instant hit,” he adds.
So what are the returns like in Dubai?
Unlike the local property scene that has been performing poorly after undergoing two market corrections back to back, relief for investors has come in the name of Dubai where returns are the opposite.
Short-term rentals
Simon Brown, the director of sales at Homebond Properties which operates in Dubai said that demand is highest for studios and one or two-bedroom apartments built for short-term rentals and targeted at those who are in Dubai for short visits.
There is also the class who are buying exclusive high-end holiday homes and institutional investors who driven by the high returns are buying whole apartment flats.
“There is a huge influx of people into Dubai and prices and rents have gone through the roof. The state of the world with war, security concerns, inflation and so on has everyone from Russia, Europe, China, Africa, the US, Australia and the UK looking for a place where things work, are safe and have no restrictions to do business. Dubai is offering all that and more,” said Mr Brown.
“When they come here, they have to be housed. That is why global hotel brands have flocked here.”
20pc return on investment
Mr Brown says that on average, an investor can recoup their investment in studios, one-bedroom or two-bedroom apartments after three to five years with a return on investment rates of 20 per cent and above.
A studio, for example, sells for Sh7 million in Marina, Downtown Dubai, Jumeirah or Palms and fetches upwards of Sh1.2 million a year as rental income when let out as a short-term rental unit.
“Compare that with Kenya where a similar unit will take 10 to 15 years to recoup the initial investment, it is easy to see why Dubai is a property hotspot,” said Mr Brown.
Unlike Kenya where properties are listed for over a year even before an enquiry is made on it, Mr Brown talks of a recent development in which DAMAC Properties development of 500 units was sold off-plan within 30 minutes of the sale opening.
Another project by MIRAS Properties saw 1,000 units sold out before launch.
Experts say that the ease of setting up and doing business in Dubai has also contributed to the popularity of the destination.
Ease of doing business
Seth Ochieng', director of client engagement at Hearly Consultants Group, a Dubai-based firm specialising in assisting entities register in Dubai said the UAE has one of the easiest jurisdictions to set up a company in the Middle East.
“The country provides a variety of corporate structures from mainland LLCs to free zone and offshore structures for international entrepreneurs looking to do business in the Gulf,” said Mr Ochieng'.
Over the years, UAE offshore companies have become popular with high net worth individuals and none resident businesses to reduce their international tax burden, for confidentiality and asset protection.
Cryptocurrency deals
Another key driver of property sales in Dubai is that it allows buying of the property through cryptocurrency.
“More villas were sold to British nationals last month than any other month in history. The units were 60 percent bought by youths under 30 years old using bitcoin,” said Mr Brown.
Simon Kabu of Bonfire Ventures, a tour company that ferries thousands of holidaymakers every year said that almost non-existent visa regulations has popularised Dubai.
“The scrapping away of flight taxes makes it cheaper to fly to Dubai than any other East African country,” said Mr Kabu.
