Buying a second home in the United Arab Emirates involves more than choosing the right neighbourhood, apartment, villa, or townhouse.
There are several things you need to check to make sure you purchase the perfect property for family weekends, a retirement home, or a rental.
This expert guide walks you through five essential checks to help you understand property investments and buy a second home in the UAE confidently.
- Property ownership regulations
- Budget and financing options
- Market and property value trends
- Location and amenities
- Maintenance and recurring costs
1. Property ownership regulations
UAE and GCC nationals and non-UAE nationals have different property ownership rights.
UAE and GCC nationals can buy a home anywhere within the country. However, foreigners can only purchase property in designated freehold areas for full ownership.
If you are an expat, find out which freehold areas you can buy property in. You can then narrow down your options and check which types of property ownership are available.
Difference between freehold and leasehold properties
A freehold property gives the buyer full ownership of the home and the land it sits on, with the freedom to sell, lease, or pass it on as inheritance.
Leasehold ownership, on the other hand, grants the owner the right to use the property for a fixed period of 25 to 99 years. The land itself remains owned by another party. This comes in four different systems:
- Ownership: This system grants expats ownership deeds of residential units for 99 years. The owner can let go of the property, but not the land, as they see fit, after the specified period.
- Musataha: Under this system, foreigners can own residential property for 50 years, which can be renewed for the same period. Owners can make improvements or renovations to the home.
- Usufruct: Under this system, expats can own a residential unit for 99 years, but are not allowed to make any changes to the property.
- Long-term lease: This system pertains to leasing the property for 25 years or longer.
Understanding these four systems can help you select the best property for your investment goals. This is particularly important if you plan to buy a home to rent out, as some communities may have strict rules about it.
Property ownership and residency visas
Buying a property in the UAE allows you to apply for a residency visa, but you need to meet certain requirements.
For instance, you can apply for a two-year Real Estate Owner Visa if you earn at least AED 10,000 every month. You also need to invest in a pre-built, habitable home.
The UAE Golden Visa is another visa you can apply for when you buy a second home. You can obtain this visa by investing at least AED 2 million in a property.
2. Budget and financing options
Before starting your search for a potential second home, review your income and assess your financial capacity. You should be able to pay for the property in full upfront or afford the monthly payments.
Your budget should also include upfront costs, such as property registration fees and agent commissions.
Mortgage eligibility
To apply for a mortgage, UAE nationals and foreigners must:
- Be between 21 and 65 years old
- Hold a UAE ID
- Provide proof of residence in the UAE
- Be employed or self-employed
- Provide bank statements
The minimum monthly salary requirement for mortgage applicants ranges between AED 10,000 and AED 15,000, depending on the bank. A lower minimum monthly income is often required of UAE nationals than of expat applicants.
The minimum duration of employment and business ownership (if self-employed) also varies for UAE nationals and foreigners.
Take a look at your credit score and improve your debt-to-income ratio to boost your chances of getting a mortgage. Make sure you can also provide proof of having a stable job and a good employment record.
What is the loan-to-value (LTV) ratio?
The LTV ratio pertains to the loan amount the bank can lend you relative to the property’s value. The UAE Central Bank regulates this ratio to ensure fair rates are being implemented.
The LTV ratio for UAE nationals buying a second home is 65% of the property value. For foreigners, it’s 60% of the total property value.
For example, if you are a UAE national interested in buying a home worth AED 5 million, the maximum mortgage is 65% of the total price. You need to pay at least a 35% deposit.
If you are a non-UAE national, the maximum mortgage you will be granted is 60% of the total property price. The required deposit is 40% of the property’s value.
Review the interest rate, repayment terms, and associated fees as well to ensure the mortgage fits your budget.
3. Market and property value trends
The UAE real estate market experiences fluctuations, with property prices varying based on location, market trends, and other factors. Study the market to determine whether property values are rising or falling in your preferred area to know if it’s the ideal time to invest.
Property values also depend on factors such as location demand, proximity to key amenities, and future developments in the area.
A property valuation can help you understand fair market prices and the home’s potential return on investment (ROI) if you plan to rent it out.
How to compare property valuations and appraisals for UAE homes
You may consider investing only in either a property valuation or appraisal, but you can make a better decision if you do both.
A valuation is usually done by a bank-approved valuer for mortgage purposes. You can also use a property valuation tool to get the home’s current and potential value.
An appraisal, on the other hand, is a real estate agent’s estimate of a property based on recent sales.
You can find the ideal second home in the UAE by considering information from both reports. This entails:
- Looking into the recent transaction prices for similar properties in the same building or area.
- Checking the unit size, floor level, view, and condition because they affect value.
- Reviewing market reports from reputable agencies to see broader price trends.
How to assess a property’s rental income potential
If you’re buying a second home to rent it out, you can evaluate its potential rental income with these tips:
- Compare the prices of properties with similar sizes, layouts, and amenities.
- Check recent listings and ads to know the average rental rates of properties in the neighbourhood.
- Consider proximity to business districts, schools, well-known attractions, and other factors that can influence demand.
- Calculate potential ROI by deducting service charges, maintenance, and management fees.
- Look into vacancy periods, as tenancy gaps can affect annual income.
- Review local rental regulations and caps that may limit increases.
You can set realistic expectations and select a second home with stronger long-term potential by checking market and property value trends.
4. Location and amenities
Your second home’s location is a vital factor to consider, whether you’re buying one for yourself or as a second source of income.
Consider the proximity of the property to airports and business hubs for convenience. This is also an excellent selling point that can appeal to tourists if you plan to rent it out.
It would also work to your advantage if you choose a home in a neighbourhood close to essential amenities like schools, hospitals, and supermarkets.
Proximity to dining hubs and recreational facilities, including swimming pools, parks, and malls, is also a factor worth considering.
Having these amenities nearby can make it easy for you and potential renters to access them whenever you like and enjoy everything the area has to offer.
How to choose the right community in the UAE
Below are additional things to consider when looking for the perfect neighbourhood:
- Cost of living
- Your lifestyle and preferences
- Feedback from current and previous residents
- Transportation options
Amenities and features to look for in your second home
If you want your second home to appeal to renters, look for properties with these in-demand amenities and features:
- Balcony
- Swimming pool
- Gym
- Covered parking
- Waterfront view
- Private garden
Location and amenities make a property valuable and appealing for anyone living there, so check these when buying a second home.
5. Maintenance and recurring costs
Properties for sale in Abu Dhabi, Dubai, and other emirates come with maintenance fees and service charges. Consider these expenses when buying a second home to ensure they fit into your monthly budget.
Service charges cover the maintenance and management of the property, particularly communal facilities, such as gyms, swimming pools, and gardens. It also covers expenses for security, cleaning, landscaping, and community or building management and administration.
In apartments, it covers the upkeep of the reception area, lifts, parking areas, and other facilities and services.
Recurring costs pertain to electricity, water, internet, and other utilities. These vary by emirate and also depend on the service provider.
How are service charges computed?
Service charges are calculated per square foot, with the base rate varying by property type. Apartments typically have higher recurring service charges than other property types because apartment buildings tend to require more frequent maintenance.
These fees can be paid annually or quarterly, depending on the apartment building or community management.
Do second homes come with property taxes?
There are no real estate or property taxes in the UAE, which means you don’t have to pay for them, whether you’re buying your first or second home. Income from residential rentals is also exempt from tax.
It’s best to know these recurring expenses beforehand, as high maintenance and utility bills can put a dent in your monthly budget, whether you live in your second home or rent it out.
Find your dream home the second time around
The UAE offers many opportunities for second-home buyers. Knowing the ownership rules, budgets, location, and recurring costs can give you a clearer picture of what you are committing to.
With the right checks in place, you can own a second home that meets all your requirements.
