Real estate options for both residential purposes and investment. Comparative overview of Russia and the UAE
It may seem that comparing countries as diverse as Russia and the Emirates is not entirely appropriate. Factors such as location, history, culture, climate, and macroeconomics set them apart. However, the real estate sector paints a different picture. Russian investors are now pondering the destination for their capital – their home country or the UAE. While Dubai holds its appeal, Moscow has also moved past the sanctions-induced shock.
So, the pressing question arises: where should one invest before the close of 2023, and where is the ideal place to purchase an apartment – Russia or the Emirates? In this article, we will undertake a comparison of the advantages and disadvantages of each country, evaluating their prospects and opportunities.
Quick overview of the countries
The Russian Federation, a federal presidential-parliamentary republic, is the largest nation globally, spanning both Eastern Europe and Northern Asia. Covering a vast expanse of 17,000,000 km², the majority of its population resides in the western region. Notable areas include Moscow and the Moscow region, as well as St. Petersburg and the Leningrad region.
The UAE, a federal state with an absolute monarchy, is situated in the northeastern region of the Arabian Peninsula. Comprising seven autonomous emirates – Dubai, Abu Dhabi, Ras Al-Khaimah, Ajman, Sharjah, Fujairah, and Umm Al-Qaywain. It spans a total area of 84,000 km². The majority of its population is concentrated in major cities like Dubai and Abu Dhabi.
Comparison of Russia and the UAE
Standard of living
When it comes to the standard of living, the Emirates consistently secure top spots in global rankings. According to the Numbeo portal, the UAE holds the 15th position, outranked only by Central and Northern European countries. In the same ranking, Russia ranks 67th, positioned between Kenya and Morocco.
In terms of nominal GDP per capita for 2023, the UAE stands at $49,000, surpassing figures seen in France, England, and Japan. Russia, on the other hand, reports a GDP per capita of $12,500 in 2023, similar to the levels seen in Argentina, Bulgaria, and China.
While the UAE doesn't make it to the top 20 of the most expensive countries to live in, it still isn't the most budget-friendly location. For instance, a basic monthly grocery basket in Dubai costs around $259, and renting a one-bedroom apartment in the region can set you back approximately $2,000. The average post-tax salary in the emirate hovers around $3,600.
In contrast, Moscow offers a more economical lifestyle. Monthly groceries come to around $158, and renting a studio apartment costs approximately $710. However, the average salary is relatively low, at $1,000 post-tax.
Nature and climate
The majority of Russia is situated at northern latitudes and is characterized by vast stretches of taiga. In the European part of the country, where most of the population resides, temperatures fluctuate from -11 degrees in winter to +25 in summer. Russia is bordered by 13 seas, but only the Black, Azov, and Caspian seas offer warm waters suitable for swimming, primarily from May to September.
In the UAE, the climate is tropical desert. Summer temperatures soar to an average of +50 degrees, while winter temperatures remain above +20 degrees. Rainfall is rare, but sandstorms are common, mainly during the dry summer season. The country is bordered by the Persian Gulf, with a bathing season lasting from April to October, as water temperatures reach around +30 degrees.
Culture and religion
Russia is a secular and diverse nation where none of the religions are recognized as mandatory or state-endorsed. People have the freedom to choose their faith, and they can equally choose to abandon it.
The majority of believers in Russia adhere to Orthodox Christianity, which is formally considered the dominant denomination in the country. However, only one church holiday, Christmas, is celebrated at the state level, and participation in these celebrations is a personal choice.
In the UAE, Islam holds the status of the state religion and significantly influences the way of life and traditions, with Islamic principles enshrined in the country's laws. Approximately 90% of the population in the UAE practices Islam, but foreigners are not prohibited from practicing other religions.
While residing in the Emirates, it's essential to observe certain aspects of Sharia law and cultural norms. These guidelines include:
- avoid wearing overly revealing clothing;
- refrain from public displays of affection, including hugging and kissing;
- seek permission before taking photos of local individuals;
- show respect during religious holidays, such as Ramadan, by refraining from eating, drinking, or smoking in public places;
- abide by alcohol restrictions in emirates where they are in effect.
Freedom of movement
In recent times, Russia has been subject to sanctions that have restricted visa issuance and travel to Western European countries, the USA, and Canada. Nevertheless, in 2023, Russians still enjoy visa-free access to around 79 countries, including destinations such as Turkey, Egypt, the Maldives, the UAE, Serbia, Montenegro, Armenia, and Georgia, among others.
In contrast, the UAE's local passport is regarded as one of the world's most powerful, granting its citizens visa-free access to 127 countries and offering visa-on-arrival privileges in 53 countries. While expatriates without UAE citizenship do not enjoy these same privileges, obtaining a resident visa significantly facilitates the process of acquiring a Schengen or American visa.
Comparing real estate markets in Russia and the UAE
Features of real estate purchasing
Citizens of the Russian Federation face no restrictions when buying real estate within the country. They can own apartments, commercial spaces, completed houses, or plots of land.
Russians can acquire real estate exclusively in specially designated areas for foreigners known as freehold zones. In Dubai and Abu Dhabi, these zones occupy 90% of the cities, offering investors a wide array of options. Notable areas in Dubai include Business Bay, Downtown, Dubai Marina, JLT, and Palm Jumeirah, while in Abu Dhabi, you'll find freehold zones in Yas Island, Saadiyat Island, and Al Reem.
Real estate prices
The most expensive apartments and private houses in Russia are primarily located in the capital. Attractive projects within the city can be found inside the Garden Ring and the Third Ring Road, while suburban facilities are situated in the western direction.
As of the latter half of 2023, a square meter in a new Moscow building was priced at $3,655, and in a completed project, it was $4,120. In prestigious areas, apartment prices can reach up to $9,270 per square meter. Private houses, cottages, and estates come at a rate of $1,290 per square meter.
Dubai and Abu Dhabi are popular cities for real estate investments, particularly in coastal communities frequented by tourists and business districts preferred by expatriates and entrepreneurs.
As of 2023, Dubai boasted the most expensive real estate, with apartments priced at $3,600 per square meter and villas at $4,454 per square meter. In the UAE capital, Abu Dhabi, prices were $3,340 per square meter for apartments and $2,200 per square meter for villas.
Taxes and fees
Property taxes in Russia:
- state fee for registering a DDU: 350 rubles;
- state fee for registering ownership rights: 6,000 rubles;
- property tax payable every 12 months.
Property taxes in the UAE:
- 4% land tax on ownership transfer in Dubai;
- 2% land tax on ownership transfer in Abu Dhabi;
- administrative fee: $147;
- registration fee: $544 for transactions under $136,000 and $1,089 for amounts exceeding $136,000.
Both UAE citizens and expatriates are exempt from annual property taxes, unlike the situation in Russia.
Returns and benefits
In the Russian capital, the value of primary real estate is on an upward trajectory, prompting experts to suggest investing during the construction phase when it can appreciate by 20-30%. On the contrary, secondary properties do not exhibit substantial price growth over time since transactions are typically executed at the object's final cost.
Based on data from Cian, resale of a new Moscow development can yield up to 30% above the initial cost. If you sell a secondary property in a well-located area with complete renovations, you can expect to add 7-10% to its price.
Regarding rental income, an apartment or apartments in the center of Moscow can generate over a million rubles annually. Rental rates vary depending on the residential complex's class and location. For instance, prestigious areas like Presnensky and Zamoskvorechye can yield returns of 4-6% per year. In contrast, properties situated further from the city center generally yield lower profits, with an owner earning around 250,000 rubles annually at a 3% return.
The average payback period for real estate in Russia is more than 20 years.
In Dubai, it is advantageous to invest at the project's inception, with properties appreciating by 15-30% by project completion. Completed properties also offer favorable returns, with secondary housing in high-demand areas appreciating by up to 40% in a year.
When reselling new developments in Dubai, a successful scenario can yield up to 97% of the initial cost. An actual case from Whitewill serves as an example: a client who purchased an apartment in the Central Park project for $365,000 and managed to pay $87,000. A year after construction commencement, the property's value rose to $450,000, resulting in an additional $85,000 for the client from the resale.
For secondary real estate, the potential returns can be even more significant, especially for villas on Palm Jumeirah – an artificial island that remains in high demand. For instance, a villa in the Palma Frond M community on Palm Jumeirah has witnessed an impressive 889% increase in value over 14 years, surging from $1,266,000 to $12,500,000. The last villa owner acquired it for $4,900,000, gaining $7,100,000 from the sale.
The return on investment from renting real estate in Dubai is 15% for short-term rentals and 5-8% for long-term rentals, with a payback period of 10-12 years.
Making the final choice
For Russians, opting to buy property within their own country presents a more straightforward process, characterized by familiarity and a lack of foreign bureaucracy. However, in 2023, Russian real estate owners and potential buyers must maintain a vigilant eye on various factors, including inflation rates, central bank decisions, and fluctuations in the dollar exchange rate.
The UAE remains largely unscathed by global upheavals and is unlikely to face significant disruptions in the coming years. The nation boasts a thriving economy and a growing influx of foreign capital, offering local real estate owners a sense of security with a stable income. As residents of the Emirates, they enjoy freedom in their actions, which includes opening accounts in local banks, obtaining international driver's licenses, and traveling the world with ease.
Investment-worthy UAE projects
The Royal Atlantis Residences
Situated on the crescent of the Palm Jumeirah in Dubai, this iconic hotel offers serviced apartments along with private beach access, restaurants, boutiques, fitness facilities, and an in-house art gallery. An entertainment hub featuring a waterpark and dolphinarium is just a 14-minute stroll away. A short 8-minute car ride takes you from Atlantis to the trunk of the Palm Tree and Nakheel Mall shopping center, while Downtown is reachable in 20 minutes, and DXB Airport is a 35-minute drive.
The hotel comprises a total of 46 private residences, ranging up to 460 m², including classic and duplex apartments. Each unit features spacious balconies and panoramic windows offering picturesque views of the Palm Tree and the Persian Gulf. Two-level options boast private courtyards with swimming pools. These residences come fully furnished and with complete plumbing and fixtures.
Residents of these apartments, like the hotel's guests, can access all of Atlantis's amenities. An array of services includes butlers, maids, nannies, and private drivers for assistance with daily chores. Leisure activities encompass beach time, spa visits, a rooftop infinity swimming pool, and Michelin-star dining. For those in need of a workspace, the hotel provides conference rooms and a lobby. The property offers barbecue areas and playgrounds for family enjoyment.
Expected completion: late 2023
Reem Nine stands tall as a 20-story complex located on the highly sought-after Al Reem island in Abu Dhabi. This project enjoys a comprehensive infrastructure in its vicinity, including a park, a shopping center, private schools, a branch of Sorbonne University, medical clinics, supermarkets, and an array of restaurants. For cultural aficionados, Saadiyat Island, adorned with museums and art galleries, is just an 18-minute drive away. Yas Island, famous for its amusement parks and the renowned Formula 1 racetrack, can be reached within 30 minutes.
Reem Nine offers apartments with sizes of up to 185 m2 for sale. Prospective buyers can choose from 1 to 2-bedroom apartments featuring panoramic windows and balconies that offer splendid views of Abu Dhabi's canals. Some units include rooms for domestic staff. On the upper floors, there are generously spacious penthouses. The apartments are sold with a complete finish, a fitted kitchen, and plumbing.
The complex's facilities encompass a well-equipped fitness center, a spa with a swimming pool, a cinema, a business lounge, and a children's playground. While some residents prefer working up a sweat on the treadmill, others can unwind in the spa's Turkish bath – hammam. For an evening of entertainment, you can invite your neighbors to join you in the private cinema. And if work calls, there are dedicated meeting rooms available in the business lounge.
If you've made the decision to invest in real estate in Dubai and Abu Dhabi, we're here to assist. Simply give us a call at +7 (495) 431-99-33. Whitewill's experts will help you explore suitable options with optimal liquidity. We'll guide you in obtaining a resident visa for both you and your family.