Dubai vs. The World: A Comparative Analysis of Global Metropolises
Dubai has become a popular choice for real estate investment due to its affordable prices, minimal fees, and favorable business climate. The city was recently named the third most attractive global economic destination in a report by The Economist.
Dubai competes with other popular travel destinations like Hong Kong, London, Niseko, Phuket, and Sydney. However, Dubai offers a unique set of advantages that may make it more appealing to some travelers.
Dubai vs Hong Kong
Economic Performance
Hong Kong and Dubai are renowned for their robust and resilient economies. Both cities have adopted a peg system, tying their currencies—the Hong Kong dollar and UAE dirham—to the U.S. dollar. This, coupled with low taxation, streamlined business processes, and a pro-business environment, has made them attractive destinations for investors and entrepreneurs. As per the World Competitiveness Yearbook 2023, Hong Kong and the UAE secured the seventh and tenth positions, respectively, among global economies in terms of overall competitiveness.
Dubai and Hong Kong, while both economic powerhouses, exhibit distinct economic landscapes. Dubai, once heavily reliant on oil, has strategically diversified its economy through initiatives in logistics, finance, manufacturing, and tourism. Its focus on education, technology, and skilled labor has been instrumental in reducing its dependence on traditional industries. In contrast, Hong Kong’s economy remains primarily anchored by trading and financial services, lacking the same level of diversification. However, in alignment with China’s 14th Five-Year Plan, Hong Kong is poised to play a pivotal role in the development of a global IT hub.
Affordability
The average cost of luxury real estate in Dubai is significantly lower than in Hong Kong. For example, AED 3.6 million (approximately USD 1 million) can purchase a 1,130 square foot property in Dubai. In contrast, the same amount would only buy a 226 square foot apartment in Hong Kong. Several factors contribute to Hong Kong’s exorbitant property prices. One major factor is the government’s policy of maintaining high land costs and low taxation. Additionally, Hong Kong’s large population, limited land supply, and pricing strategies employed by developers further exacerbate the high prices.
Dubai’s housing market offers a wide range of options, contributing to its affordability. In 2022, real estate developers launched a record-high 50,000 new properties, surpassing the numbers seen in 2008, as reported by the Dubai Media Office. By 2024, Dubai and Hong Kong are expected to have 32,000 and 28,000 new homes, respectively.
Investor-Friendly Laws
Dubai and Hong Kong both generally welcome foreign investment in real estate, allowing non-residents to buy, sell, rent, and develop properties. However, there’s a key distinction: the majority of properties in Dubai are freehold, meaning ownership is perpetual. In contrast, Hong Kong properties are typically leasehold, granted for a fixed term, with St. John’s Cathedral being a rare exception. While Dubai is open to all nationalities, Hong Kong restricts property ownership for individuals from Afghanistan, Albania, Cuba, North Korea, and mainland China.
In Hong Kong, property ownership is unique. Instead of outright ownership, residents hold a lease that grants them the right to occupy a property for a specific period. Historically, this lease has been 50 years. Recently, the government suggested extending leases by another 50 years without additional costs. However, there’s a catch: residents will still need to pay an annual rent equal to 3% of their property’s assessed value.
Dubai offers a significant advantage in terms of property ownership. Unlike some other locations, such as Hong Kong, owners in Dubai have full and unrestricted ownership rights over their properties. This means they can use their property as they see fit without needing government approval for actions like selling or renting. This streamlined process reduces bureaucratic hurdles and simplifies property transactions.
Process and Procedures
The property acquisition process in Hong Kong and Dubai is generally similar, but the timelines differ. In Hong Kong, transactions typically close within two months of signing the formal agreement. In Dubai, the process is often completed in about four weeks. While the procedures are similar, the associated fees may vary between the two cities. It’s important to note that foreign buyers in Dubai have the same property ownership rights and obligations as residents and citizens.
In Hong Kong, foreign buyers face a total of 40% in stamp duties when purchasing property. This includes a 15% Ad Valorem Stamp Tax, a 15% Buyer’s Stamp Duty, and a Special Stamp Duty that ranges from 10% to 20% based on the length of time the property is held. In contrast, Dubai only charges a one-time 4% fee through the Dubai Land Department.
Let’s Explore the required property acquisition fees for international investors in Dubai.
Fees | Amount |
DLD fee | 4 %, plus: – AED 580 (USD 158) for apartments and offices. – AED 430 (USD 117) for land – AED 40 (USD 11) for off-plan | |
Property registration fee | – For units priced below AED 500K (USD 136K): AED 2K (USD 545) – For units priced above AED 500K (USD 136K): AED 4K (USD 1K) | |
Title Deed | AED 250 (USD 68) | |
Real estate agent fees VAT — applies to the property registration and real estate agent fees |
5 % |
The property acquisition fees in Hong Kong are as follows:
Fees | Amount | Â |
Property registration fee | – For property transactions below AED 2.7M (USD 750K): AED 845 (USD 230) – For property transactions over AED 2.7M (USD 750K): AED 1.6K (USD 450) |
Agent fees | 1 % of the property value |
Ad Valorem Stamp Tax | 15 % of the property value |
Special Stamp Duty | Property owned for 6 months or less: 20 % of the sale price Owned for 6 to 12 months – 15 % Owned for 12 to 36 months – 10 % of the sale price Owned for 36 months or more – 0 % |
BSD – Buyer’s Stamp Duty | 15 % |
Imagine you’ve chosen to buy a finished apartment worth AED 800,000 (approximately USD 218,000) and plan to keep it for at least a year. Let’s compare the total cost of ownership in Dubai and Hong Kong.
Fees | Dubai | Hong Kong |
DLD fee | AED 32K (USD 8.7K) Plus AED 580 (USD 158) | – |
Property registration fee | AED 4,000 (USD 1K) Plus VAT of AED 200 (USD 54) | AED 845 (USD 230) |
Real estate agent fees | AED 16K (USD 4.4K) plus VAT of AED 800 (USD 220) | AED 8K (USD 2K) |
Ad Valorem Stamp Tax | – | AED 120K (USD 32K) |
Special Stamp Duty | – | AED 80K (USD (USD 22K |
Title Deed | AED 250 (USD 68) | – |
BSD – Buyer’s Stamp Duty | – | AED 120K (USD 32K) |
Total | AED 854K (USD 232K) | AED 1.12M (USD 305K) |
Considering mandatory fees, properties in Dubai often present a more cost-effective option compared to Hong Kong.
Rental Income Tax
Dubai offers a significant advantage for real estate investors: it does not levy income tax on landlords. This makes it a particularly attractive option compared to other markets, such as Hong Kong, where landlords face a standard income tax rate of 15% on the net assessable value of their properties annually. To mitigate the tax burden, Hong Kong provides a statutory allowance of 20% for repairs and outgoings associated with rental properties.
If you earn a gross rental income of AED 36,000 (approximately USD 9,800) per year from a property in Hong Kong, you’ll need to deduct allowable expenses of AED 7,200 (approximately USD 2,000). This leaves a net assessable value of AED 28,800 (approximately USD 7,800). Based on this value, you can expect to pay around AED 4,000 (approximately USD 1,000) in annual property tax as a landlord in Hong Kong.
Rental ROI and Rates
Dubai’s real estate market offers one of the highest returns on investment (ROI) globally. With a growing population and strong demand, investors can expect steady rental income and a quick return on their investment. Despite its high-end reputation, property ownership in Dubai remains relatively affordable compared to other global cities. The average monthly rental for a property in the emirate ranges from AED 4,000 to 6,000 (approximately USD 1,000 to 1,600).
Hong Kong’s rental market offers a steady income stream, though it’s not as lucrative as Dubai. While property acquisition costs are high, rental demand remains strong, ensuring a consistent flow of tenants. A one-bedroom apartment in Hong Kong typically rents for AED 5.5K to 9K (USD 1.5K to 2.5K) or more monthly.
Residence-via-Investment Programmes
Dubai offers two investment-based visa options for property buyers. The first, a two-year visa, is available to those investing at least AED 750,000 in ready property. The second, the UAE Golden Visa, is granted to those investing AED 2 million or more in real estate. Both visas extend to the investor’s spouse and children. The Golden Visa also allows the sponsorship of domestic staff. Hong Kong’s residence-by-investment program, which was suspended in 2023, is currently not accepting new applications for real estate investor visas.
Dubai vs. Other Major Cities
We’ve gathered information on popular real estate investment destinations to compare them with Dubai. The table below provides a detailed overview for your convenience.
Location | Average price per sq. ft | Average monthly rental cost for a 1-bedroom apartment | Minimum investment for a visa |
Dubai | AED 1K (USD 270) | AED 4K-6K (USD 1K-1.6K) | AED 750K (USD 204K) |
Niseko, Japan | AED 4.7K (USD 1.2K) | AED 1.2K (USD 327) | – |
Phuket and Bangkok, Thailand | AED 918 (USD 250) | AED 2.2K (USD 600) | AED 1.8M (USD 500K) |
Singapore | AED 2K (USD 544) | AED 8K (USD 2K) | – |
UK | AED 1.8K (USD 490) | AED 5.5K (USD 1.5K) | – |
Sydney, Melbourne, Australia | AED 3.8K (USD 1K) | AED 8.8 K (USD 2.4K) | – |
Canada | AED 4K (USD 1K) | AED 6.K (USD 1.7K) | – |
Conclusion
Dubai stands out as a top global destination for property investment, offering exceptional returns on investment (ROI) and the added benefit of zero income tax. This combination makes it a highly attractive option for real estate investors. Another significant advantage is the Golden Visa program, which sets Dubai apart from most other investment destinations, including the seven others mentioned earlier. While Hong Kong may also offer investment opportunities, it is often characterized by high property acquisition fees and comparatively lower returns, making it less ideal for those seeking to maximize their investment capital.