How to preserve your money during a crisis, using Dubai real estate as an example

Economic crises, inflation, and unexpected situations often make people think more carefully about how and where they keep their savings. Keeping money at home is not always safe, but storing it in a bank account isn’t the best solution either. In many cases, the interest on deposits is too low to keep up with inflation or currency fluctuations. In addition, in the event of a bank failure, accessing your funds can take a lot of time and patience, especially if the amount is large.

Investment as a method of preserving and increasing savings

To preserve and increase their savings, people often invest in shares of different companies and trade them on the stock exchange. Those who do not have specific knowledge of market behavior usually turn to brokers for assistance. Many brokers not only help preserve savings through stock trading but also earn profits from it. However, nobody is completely protected from failure; one wrong decision can cost an entire fortune. For this reason, even many years of experience do not fully guarantee the safety of investments. During a crisis, when the market declines, investing money for preservation can easily turn into a painful experience.

Another method of investing is opening a business. This is a good option in a steadily growing economy, but it becomes far less suitable during a crisis. The main problem of a falling stock market and economic instability is that the purchasing power of an average person decreases. As a result, even large companies are forced to reduce production, lay off their employees in order to maintain operations, and in some cases, completely shut down their business.

One of the most interesting investment options during a crisis is real estate, since its liquidity continues to grow steadily. Such property can easily be found in Dubai.

Investment in real estate in Dubai

Dubai is a modern, rapidly growing city, characterized by a high standard of living and luxury. In addition, it is one of the world’s biggest tourism destinations, welcoming up to 17 million visitors every year. If we look at demand trends using the Google Trends service, we can see a steady increase in demand for real estate in Dubai:

Fig. Growth in demand for real estate in Dubai

Advantages of investing in real estate in Dubai:

• Regardless of any circumstances, real estate generally does not lose its value. Even when prices decline, they usually return to their previous level over a certain amount of time.
• High-liquidity properties continue to increase in value. To select the right property, it is advised to consult with real estate experts.
• Real estate can be rented out, which allows investors not only to recover their investment faster but also to increase their income.

Disadvantages of investing in real estate in Dubai

• There are maintenance and ownership fees that should be considered before purchasing property.

Regarding property maintenance expenses, in Dubai, these are referred to as service charges (similar to community fees). They are determined by the developer in conjunction with the Dubai Land Department (DLD) at the time of the building’s handover. This rate may fluctuate slightly over time. This fee covers everything: technical maintenance (elevators and pools, for example), cleaning of common areas, the lobby, parking, security services, and much more. The rate varies significantly from one district to another.For instance, in outlying areas of the city, the rate might be 10–11 AED per square foot, whereas on Palm Jumeirah and in the JBR area, it can be around 25 AED per sq. ft. and up to 50 AED for serviced apartments. Mathematically, the calculation is as follows: if your property has an area of 800 sq. ft. and the rate in Business Bay is 18 AED, then 800 \times 18 = 14,400 AED per year. There are adjustments in the case of large balconies or terraces, but generally, the calculation follows this specific formula. In villas and townhouses, service charges are typically much lower, ranging from 2.5 AED to 6.5 AED per square foot. Consequently, many savvy buyers prefer houses (villas and townhouses). Even though the initial price for villas and townhouses is higher than for apartments, in the long run, it can prove to be much more cost-effective specifically because of the annual amounts formed by these charges. Service charges in Dubai are usually paid once a year. Invoices are sent via the Mollak system to the owner’s email address, where the payment can also be processed online.

• With an unprofessional approach, there is a risk of purchasing illiquid property that might not generate profit and could also be difficult to resell.

Footnote: To avoid financial losses, it is important to consult with real estate specialists. Preferences should be given to professionals who have extensive experience in living and working in the Dubai real estate market.

The real estate market of Dubai in 2024

The real estate market in Dubai continues to grow steadily. During the third quarter of 2024, sales reached approximately 141.8 billion dirhams, which is nearly 30% higher than during the same period last year. More than 20 thousand transactions were completed, mainly due to the growing sales of villas and apartments that are under construction.

Overall, in 2024, more than 105 new projects were launched, while around 48,907 real estate units were completed by the third quarter of the year.

Fig. Real Estate Sales Volume in Dubai, 2011–2024 (AED billion)

The growing interest in the Dubai real estate market is connected to its high liquidity, low interest rates, and the continuously increasing number of expats that move to the UAE. Despite the challenges that were caused by inflation and the Covid-19 pandemic, the UAE became one of the few countries that managed to overcome the pandemic successfully and was able to recover from it quickly. The first few quarters after the Covid-19 pandemic were marked by rapid growth in both domestic and international demand for all types of real estate in Dubai. This phenomenon was caused by the strong trust of buyers and wealthy investors.

Fig. Total real estate units sold in Dubai (2023 vs 2024)

It is evident that the volume of real estate transactions has increased compared to 2023. This serves as an excellent signal for investment. Despite the complex global situation, the Dubai real estate market is becoming increasingly active.

Who buys real estate in Dubai during a crisis?

Let’s examine this using the example of villa sales. Off-plan villas are of interest to the 36–45 age group. The highest year-on-year growth in interest compared to previous periods is observed among individuals aged 41 to 45.Fig. Demand activity of age groups based on the example of the type of real estate “Villas”

Signals of investing in real estate in Dubai

Let us consider the main signals for investing in real estate in Dubai, which can be seen in 2024:

1. An increase in mortgage transactions: This shows that a large number of property sales are being financed through bank loans.
2. The increase in interest rates did not significantly affect the real estate market in Dubai.
3. According to data that can be seen in dxbinteract, the average real estate price in May reached its highest level compared to the same period in previous years.

Fig. How the prices in real estate in Dubai change

4. In 2024, the market continued its upward trend following an equally successful 2023: sales volume increased from AED 34.2 billion to AED 37.4 billion, representing a 9.32% growth, whereas 2023 itself showed a remarkable increase of 49.63% compared to 2022.

How to preserve your money during a crisis, using Dubai real estate as an example. Conclusion

Let us summarize the current situation in the Dubai real estate market:

1. The Dubai real estate market demonstrated a steady upward trajectory throughout 2023 and into 2024, and continues to maintain this trend, serving as a strong signal for investment.
2. During times of a growing crisis, it becomes difficult to predict where money should be invested to preserve its value. The stock and cryptocurrency markets, which were previously growing at rapid rates, are currently showing extreme volatility. As a result, investors are starting to pay more attention to high-yield real estate investments. The average return on investment on property in Dubai is around 8% per year, which is significantly higher than in other cities like London and Paris.
3. Considering the continued growth of migration to the UAE, it can be assumed that the current real estate prices in Dubai are still not at their peak. Therefore, further price growth can be expected due to the increasing demand.
4. Another important argument in favor of buying property in Dubai is the relatively new law in the UAE that allows investors to get a 10-year Golden investor visa.