Having bottomed out in November 2020, property prices in Dubai are showing signs of steady growth. Vaccination rates are high in the emirate, so investors perceive it as a safe place to enjoy life. As a result, demand for luxury properties has been growing, especially when it comes to villas and townhouses. Prices for penthouses have been increasing slightly slower, so it’s only natural to consider this type of property if you’re going to invest or relocate to Dubai.

Areas to buy a penthouse

The Palm Jumeirah, Dubai Marina and Downtown Dubai offer a wide choice of penthouses. The ROI for apartments here is between 5 and 6%.

The Palm Jumeirah

Known for its high-end hotels and upmarket global restaurants, Palm Jumeirah has quite a few luxury apartment towers. These are not just run-of-the-mill skyscrapers but unique projects, each with an unmistakable architectural style of its own.

Take, for instance, Atlantis, The Royal Residences. The iconic silhouette features multiple terraces going down towards one another and connected by a sky-bridge. Or the 25-storey residential building One at Palm Jumeirah with its unpredictable, mind-blowing architecture. Another in-demand location within the Palm Jumeirah is the Palm Crescent, which is an 11-kilometre-long breakwater shielding the island from the open sea. The prices for a 3-bedroom penthouse (4,442 sq. ft.) on the Palm Jumeirah start from AED 4,000,000.

Dubai Marina

Another luxurious residential neighborhood, Dubai Marina is known as a great tourist attraction. Here, skyscrapers are poised alongside the winding canal, where yachts can be seen. Being a hive of tourist activity, the area provides a constant stream of tenants.

Dubai Marina offers a wide range of smaller penthouses, including 2-bedroom (1,400 sq. ft.) and 3-bedroom (2,300 sq. ft.) options available for AED 2,100,000 and AED 3,500,000 respectively. This is not to say that you can’t find larger properties here — take, for instance, La Reve with its 5-bedroom penthouses (over 14,000 sq. ft.)

Downtown Dubai

The area boasts probably the largest choice of spacious housing on offer. It’s one of the city’s prime real estate hotspots. On the one hand, it attracts tourists with its world-famous Burj Khalifa, The Dubai Mall, and Dubai Fountain as well as Burj Park, which regularly hosts large-scale events. On the other hand, this area is convenient to live due to its pedestrian-friendly design, an abundance of hospitals, prestigious schools and malls. Due to this, properties here draw both short-term and long-term tenants.

Property is rather costly in Downtown Dubai, with penthouses sold from AED 20,000,000 for a 4-bedroom penthouse (4,000−5,000 sq. ft.)

Also, the list of sought-after communities with a substantial portfolio of penthouses includes the following:

• Business Bay with its waterfront Dorchester Collection as well as such signature projects as Al Habtoor City, Executive Towers, and the Volante tower. While it is possible to find a 2-bedroom penthouse (1,605 sq. ft.) for only AED 1,850,000, properties are generally larger here and cost at least AED 3,500,000 for a 3-bedroom penthouse (3,500 sq. ft.)
• Jumeirah Beach Residence has a smaller choice. You can expect to pay AED 3,700,000 for a 3-bedroom penthouse (1,819 sq. ft.)
• At Jumeirah Village Circle, compact 2-bedroom penthouses (1,163 sq. ft.) can be found for AED 1,250,000. That said, the choice is wider in the segment of spacious properties (5,000 sq. ft. and more), which cost at least AED 4,500,000.
• Dubai Creek Harbour (The Lagoons) offers 3-bedroom penthouses (1,984 sq. ft.) starting from AED 2,820,000.
• Jumeirah Lake Towers, where prices for 4-bedroom penthouses (3,800 sq. ft.) start from AED 2,900,000.
• For a 3-bedroom penthouse (4,112 sq. ft.) in Dubai International Financial Centre (DIFC), expect to pay not less than AED 5,700,000.

Factors that will affect demand in 2021−2022

Here’s a list of recent events and tendencies playing a major role for Dubai real estate market in the short-term perspective:

• UAE tops the global vaccination rankings: by October 2021, 91% of the residents received one dose and 80% received both doses of a COVID-19 vaccine
• Expo2020 (October 2021 — March 2022) has already attracted hundreds of millions of visitors
• trade liberalization and the 2040 masterplan, which promise sustainable urban development
• immigration reforms
• visa reforms: a five-year retirement visa for over-55s, long-term residence visas for investors
• stimulus packages from the government to support companies and the business sector
• other fiscal incentives to support the economy

Factors that will affect demand in the long run

Dubai is among the world’s fastest-growing cities

Over the past 60 years, the city has been experiencing a population boom. In the 1960s, there were 40,000 people, while by 2005, their number reached 1,204,000. The population rocketed by a million from 2015 to 2020 reaching 3,400,800. The need to accommodate new residents fuels the demand for real estate.

Comparatively affordable prices per square foot

It is several times smaller than in London, Hong Kong, New York, or Singapore.

Relatively easy access to finance

Loan-to-value ratios were increased by the UAE Central Bank by five percent for first-time buyers in March 2020, which gave many tenants a chance to buy property. Dubai is known for comparatively low interest rates.

Payment plans have been growing more attractive

In 2016, only 6.6% of the total payment was required to be paid post-handover, while in 2020, an average payment plan gives a chance to pay approximately 28% of the payment post-handover. In 2016, around 39% of the total payment was required on completion, 43% - during construction. In 2020, these payments have decreased to 28% and 34% respectively.

No taxation on properties or income, low rate of property fees

There are no direct income and property taxes in Dubai. Also, there are no capital gains taxes. Leases of residential properties imply a tax of 5%.

Enticing rental yields

The return on investment index in Dubai ranges from 5% to 7% and exceeds 10% in some areas. This is a lot more than, for instance, in New York, London, Singapore, or Hong Kong, where ROI ranges from 2.35 to 3.3%, according to GlobalPropertyGuide.

Convenient for living with a family

Dubai is a clean city with a carefully thought-out infrastructure, from public parks, shopping malls, sports and leisure facilities to educational and medical facilities. It is also known as one of the world’s most secure cities with very low levels of crime.

Good place for a holiday home

Countless attractions and sunny weather all year round, as well as the abundance of beaches, contribute to the holiday atmosphere.

The property is adding value gradually

Property markets like Canada, Australia, and New Zealand have soared in 2021 and are expected to continue their exceptionally fast growth, whereas the price of real estate property in Dubai has been rising more gradually and stays comparatively affordable.

Bottom line

Dubai has been moving beyond oil industry, tourism, and leisure, towards a stable economy offering multiple business opportunities. The demand for housing is fuelled both by short-term and long-term factors. Being a type of luxury properties, penthouses offer a number of privileges, yet prices here are increasing slower than at the high-end real estate market on average.