International Investment

INVESTING IN DUBAI
FROM GERMANY

German investment into dubai property market

In recent years, German investors have doubled down on property, with real estate becoming an increasingly important asset within their portfolios.

This has also coincided with the continued growth of Dubai’s 3rd market cycle and ever-more welcoming rules and guidelines about foreign ownership and investment.

Data from the past few financial quarters shows German real estate has offered strong growth – around a 1.9% rise in capital values. 

Pre-pandemic prices record the average cost of an apartment in Germany to be around EUR 400,000, while today, almost five years later, the market average stands at EUR 575,000.  

Indeed, this growth is occurring at almost 150% of the rate of most other EU markets.

Dubai real estate market

One market that has outperformed Germany during this period is the Dubai real estate market.

The Middle East, a region witnessing double-digit growth, presents itself as a diverse and lucrative market, contrasting the modest, single-digit expansion rates typical in other prime and mature markets. 

German investors know Dubai is one of the strongest-performing property markets in the world: 

  • Residential value: Increased by 5.6%, marking the 9th consecutive quarter of rises.
  • Current cycle: Values stand 20% higher than Q1 2020.
  • Still undervalued: Despite the increase, average prices are still just below the 2014 peak.
  • Annual increase: Prices surged by 13% on an annualised basis.
  • Apartment prices: Rose by 5.7% to around AED 1,230 per square foot, making it 15% in 2 years.
  • Apartment trajectory: Despite a 12% rise in the last year, apartments are 18% below the 2014 peak.
  • Villa performance: Increased by 5.1% to hit AED 1,450 per square foot, 15% higher than Q1 2022.
  • Villa surge: Reflecting a 44% rise since January 2020, villas continue to outperform the market post-COVID-19.

For individual German investors and companies, this presents both fascination and challenges – and it is little wonder investment volumes between the two countries are set to continue growing.

What do German investors need to know about Dubai property?

Dubai’s property landscape is undergoing a significant transformation, presenting a distinct shift for German investors eyeing real estate opportunities. It is now considered a mature and increasingly robust market, backed by strong macroeconomic trends and stark supply and demand imbalances.

Previously, the market was characterised by a boom-bust cycle, drawing considerable interest from speculative investors.

During the Gold Rush era, after the opening of Dubai’s property market to foreign investors, few Germans invested in Dubai real estate despite this period witnessing monumental capital appreciation spikes.

However, today’s property market in Dubai tells a different story, reminiscent of the scenario seen in European powerhouse London two decades ago. Recent times have seen the emirate record substantial double-digit capital gains, surpassing the global prime average growth rate twofold.

2021 marked a pivotal moment for Dubai, witnessing record-breaking industry sales transactions totalling AED 151 billion (USD 41 billion). This surge in demand exceeded previous periods by a significant margin, surpassing pre-pandemic investment levels by substantial percentages in value and volume.

Currently, Dubai’s property market offers notably strong rental yields, particularly appealing for German investors seeking an additional source of income. While investors in Germany struggle to attain a 4% annual rental return on investment, those in Dubai are comfortably recording around 7%, making it an enticing prospect for yield-focused investments.

Increased transparency attracting newer markets

Over the past decade, the Dubai Land Department has worked ceaselessly to improve transparency and attract investment from new markets – Germany being one. This has culminated in: 

Economic and investment ties between Germany and Dubai

On June 13th, 2022, Ernst Peter Fischer, the German Ambassador to the UAE, emphasised the enduring economic partnership between Germany and the UAE, highlighting the need for both nations to embrace new opportunities in the evolving economic landscape. Fischer acknowledged the continuation of traditional trade practices while urging joint investments in new technologies and businesses aligned with the rapidly transforming global economy. 

Dual agreement to diversify away from oil and hydrocarbons

He underscored the significance of transitioning toward knowledge-based, sustainable industries, noting the UAE’s move away from hydrocarbons. Simultaneously, Fischer emphasised Germany’s position within the fourth industrial revolution, focusing on digitally connected businesses propelled by artificial intelligence.

Highlighting the potential for collaboration, Fischer proposed joint investments that explore new revenue streams through shared intellectual property in these emerging sectors. In particular, he emphasised the importance of green fuels, notably hydrogen, in achieving Germany’s climate-neutral goals by 2045.

Further German–Emirati investment

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