Shanghai vs Dubai:Which is the best to invest in property?

Both cities provide interesting investing opportunities, but here's why you should pick Dubai

11 Nov 2018, words by Aneesha Rai in The Market

Dubai vs Shanghai

Shanghai & Dubai are both some of the world's most iconic cities, because they're both known for becoming financial hubs in their parts of the world in a short period of time. It's easy to draw parallels to these two cities which both have an extensive number of expats and impressive architecture. But which is the better city to invest in? Let's find out.

Prices

While Shanghai's property prices are eye-wateringly high, Dubai still offers properties that have what we call 'affordable luxury'. Not only does Dubai offer more per square foot, it's on a completely different economic cycle than Shanghai. While Dubai's property prices seem to be flattening due to maturity in the market, Shanghai's property prices have been shooting up for the past decade. This means if you were an investor in Shanghai about 10 years ago, you'd be minting money on just the value appreciation of your property. However, that may not be the case now. Constantly shooting prices often point to one thing, a bubble. An average 1,000 square foot apartment in Shanghai could fetch up to US$725,000. The same amount in Dubai could get you a 1,600 sqft apartment in Mohammed bin Rashid city (off-plan) or a 2,000 sqft ready to move in townhouse in Arabian Ranches 2. That's value for money. 

Both cities have a high standard of living, however, the affordability factor in Dubai is greater, mainly for off-plan projects. The UAE banks are also looking into easing their loan ratios and developers are often coming up with innovative post-payment plans. Currently, the funding requirements for a ready home in Dubai is 25% cash with 75% mortgage capacity. The mortgage capacity for an off-plan home is only 50%. In contrast, Shanghai offers an 80% loan to value ratio.

Payment plans

While there is a minimum down payment to be able to bid for property in Shanghai, this system doesn't exist in Dubai. While one can expect an investment of US$1 million as the minimum to be even eligible to book a property in Shanghai, in Dubai, you can even book your off-plan property with 5% of the total value, which runs up to ten thousands of U.S. dollars maximum, even if it's a luxury property.

Availability

In terms of apartments and availability, there are plenty of (expensive) options in Shanghai on the secondary market. The market is saturated with developments, with excessive demand for newer properties that use a lottery system. 

In Dubai, it's quite a different story, while quality apartments may be hard to find, the facilities are truly top-notch. There are a dime a dozen options available, with plenty of properties arriving to market, making it a treasure trove for investors looking for 6% and up in annual rental returns. 

Taxes

Another factor that needs to be addressed is taxes. The UAE does not tax property or the income on property, which makes it a good incentive to buy.