The United Kingdom (UK) and the United Arab Emirates (UAE) are two of the hottest real estate investment opportunities today for international investors.

Real estate properties in the UK remain among the most expensive assets in the global markets. Quite similarly, the UAE is one of the most popular places for real estate investment and a destination for worker relocation. There remains a very high demand for real estate property investments in the UAE, mainly in Dubai.

Having said that, there’s a big difference in pricing in these two regions. For example, Luxury apartments in London and other parts of the UK are priced higher as compared to the same type of properties in Dubai.

Nevertheless, an investment in either or the regions can prove to be quite fruitful since both the UK and UAE real estate markets continue to attract both long-term investors and profit speculators from all over the world.

Here are a few things to consider before you decide to buy property in either of these two lovely places. 

1- Rental Yields: Investing In Real Property For Rental Income

The first factor that investors might want to take into consideration is the potential rental yield of properties. This is important for investors who are eyeing properties as sources of rental income. Even for those who would be investing to resell the property after a few years, rental yield is still important because it affects their property’s resale value. 

Higher Rental Rates In UAE Compared To UK

On average, real estate properties in the UAE have a higher rental rate than properties in London and across the rest of the UK.

Existing market information and reports indicate that rental yields in the UK don’t exceed 3%. This is the same in most other European cities. By comparison, rental yields in the UAE can reach up to 10%. That’s a comparative advantage of earning three times more from your rental properties in the UAE over your rental properties in London. 

Higher Values In London Don’t Automatically Fetch Higher Rents

If you’re thinking of investing in England’s real estate market, one of the peculiar things you have to know is that properties with higher values don’t necessarily mean that they’re able to fetch higher rents from tenants. This should be a caveat to investors who might go into the London property market thinking they can just buy up any property and money will flow. It doesn’t work that way. You’ll still have to carefully select the properties that you’ll invest in. 

2- Long-Term Market Stability 

The next thing you should consider is the strength and long-term market stability if you’re planning to resell your property after several years. The economy of the UK, in general, as well as the real estate property sector, in particular, has always been a relatively stable and strong market economy. By comparison, real estate in the UAE witnessed a downturn even before the pandemic. It’s only recently that it has begun showing signs of recovery. However, 2021 produced great results, and 2022 is looking even better for the UAE property market.

London’s Rapid Pace Of Capital Appreciation 

Real estate investors who prefer London over other places are eyeing to cash in on the pace of capital appreciation in the city. The central insight, it seems, is to buy now that the prices are low and ride the speed with which real estate prices go up. London, after all, has one of the relatively faster rates of capital appreciation compared to other advanced global financial cities.  

This is advantageous for investors who buy properties with the thought of cashing in on the margin when the time to sell at a profit presents itself. But some investors are in it for the in-between. These are investors who would like to earn some monthly income from the rents instead of just relying on the prospect of a windfall after several years of waiting for property prices to go up.

Dubai Investors Buying Houses Instead Of Apartments

Real estate opportunities in the UAE property market only began to attract international real estate investors in the 2000s. This came as a result of the aggressive and intensive property development projects in Dubai. But the growth rate of property prices in Dubai reached its peak around the start of the second decade. 

The main trend in Dubai is that investors are now opting more for detached houses and villas. Market analysts in Dubai have reported that there has been a record number of sales of villas and townhouse units in 2021. There have been record-setting sales in both the luxury and budget segments of the detached homes and villas market. Housing prices increased by 5% in 2021 and this is expected to go on well into the new year. 

3- Property Pricing And Cost Of Living

London continues to rank among the cities with the highest cost of living in the whole world. This is because of the relatively high mortgage payments there, as well as the rents paid by middle-class workers for their apartments. Here are some indices to compare the two markets:

  • Consumer Prices in London (if you include rent) are 18.76% higher than those in Dubai
  • Rental Prices in London are 15.52% higher than those in Dubai
  • London has a Local Purchasing Power which is lower by 22.88% compared to Dubai 
  • The price of groceries in London is 8.16% higher than those in Dubai
  • Eating at restaurants in London would cost you 36.75% more than if you did in Dubai

UAE And UK Prices Compared 

The price of an apartment in Dubai per square meter would be about USD$5,900. This would have an area of around 120 square meters. By comparison, a similar apartment in London of the same size would be priced at approximately USD$26,260. The comparatively higher prices in London are due in large part to the lack of new property development projects. In central London, there are practically no spaces for new property development projects. 

North And South Divide In London

Before you put your money in, you should keep in mind that UK properties in the midlands tend to have lesser prices compared to other places in England. Another important insight is that properties in the north have tended to fetch higher rental returns as compared to the rental properties in the south. Analysts say that this observation is supported by the historical data on rents.

Wrapping Up

The main advantage of investing in luxury apartments in London is that the UK real estate sector has always been for the most of recent memory a relatively stable and mature market. This means it’s highly unlikely that the rapid rate of capital appreciation in London is just a fluke.

By comparison, apartments in Dubai can be five times cheaper than their counterparts in London. The main trend in the UAE is that more people are investing in villas rather than apartments. This could cause a dent in demand for apartments in the UAE in the short term.

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