Retire in the UAE?
Julian Roche Chief Economist
How easy it is to retire in the UAE? Easier as of this year, is the simple answer. There are now estimated to be almost three million expatriates living and working in Dubai alone1. An equal number are to be found in the other emirates and a growing number of those are approaching retirement age. Not all of them, by any means, will want to return ‘home’ to countries where they no longer have strong connections. Last year, the UAE responded by launching a new retirement visa – those over the age of 55, whether residents or not, can now choose to retire in the UAE. The conditions are a requirement to invest in a property worth AED 2 million (USD 545,000) or more, have financial savings of at least AED 1 million (USD 272,000) or income of no less than AED 20,000 (USD 5,445) per month. As mortgages no longer must be repaid by the age of 65, there is even the possibility to gear the necessary investment, at least modestly. In terms of permanence, the UAE retirement visa has been designed to be renewable, so in principle, retirees can stay indefinitely.
How does the UAE compare? Portugal, for example, a top destination for European retirees, has had a ‘Golden Visa’ investor programme, one route of which requires only the purchase of newer property worth EUR 500,000 (USD 550,000), or older property of just EUR 350,000 (USD 385,000). The majority of the 7,960 investors participating in the programme so far are from China. The programme may not endure in its current form, as the real estate investment route has been almost the only one that investors have taken. For retirement specifically, the D7 visa only requires income of USD 1,400 per month, plus 50% for a spouse, but applicants must be over age 65. As to permanence, in Portugal, after six years, subject to a language test, it is possible to become a citizen, which is an eye-catching advantage. Eligibility and permanence are not the only criteria, however. Any decision to relocate is multidimensional, with culture and language high on the list. Both English and Arabic-speaking retirees will be more at home in the UAE. So too, by comparison with market-leading Portugal, travel worldwide is much easier, infrastructure and the banking system is efficient, and entertainment and amenities such as golf and sailing are also aplenty. In the USA, an estimated 25% of the residents of major retirement community developer Del Webb are still working in some capacity, and nearly 10% said they are working full time2, so the ability of the UAE to provide opportunities for work will be welcome. On the other hand, access to good, inexpensive healthcare is also important, especially considering that the UAE’s climate can be unforgiving, although Lisbon reached 44 degrees Celsius in summer 2018 – it was cooler in 2019 but European heatwaves are becoming increasingly regular. Possibly most important of all is a reliable government, as Catalans have demonstrated in neighbouring Spain. For a retiree who is at least adequately financially secure, the choice between the traditional European destinations and the UAE is evidently not so clear-cut as it was. The UAE government has evidently now not only recognised the potential opportunity presented by the silver dollar, but local developers have now raised the flag, at least, to join in the hunt for what will become a valued investor class3.
1
Government of Dubai (2019) Number of Population Estimated by Nationality- Emirate of Dubai (2018 – 2016). Available at: https://www.
dsc.gov.ae/Report/DSC_SYB_2018_01%20_%2003.pdf Retrieved 27 November 2019. 2
Senior Housing News (2019) Del Webb to Open 10 Active Adult Communities by 2020, Bring ‘New Formula’ to Market. 16 June 1019. Available
at: https://seniorhousingnews.com/2019/06/16/del-webb-to-open-10-active-adult-communities-by-2020-bring-new-formula-to-market/ Retrieved 27 November 2019. 3
Tanksali, S. (2019) How the UAE’s retirement visa is boosting the charm of Dubai’s luxury residential property. (blog). May 14 2019. Available
at: https://www.geminipropertydevelopers.com/how-the-uaes-retirement-visa-is-boosting-the-charm-of-dubais-luxury-residentialproperty/ Retrieved 27 November 2019.
2
RETIRE IN THE UAE?
Retirement real estate If the retirement decision is multi-dimensional, there is no doubt that real estate choices form an important component. The most obvious retirement real estate option is freehold ownership. Abu Dhabi already provides the opportunity for expatriates to buy property in the investment zones, which include Al Reem Island, Al Raha Beach, Saadiyat Island and Yas Island, as well as in mainland districts such as Al Reef and Hydra Village. Active, well-resourced retirees already have plenty of choice, and the faintest of trends towards Abu Dhabi as the UAE retirement destination of choice is beginning to be voiced, especially when one global survey placed apartment purchase prices at USD 3,492 per sq m. This would make Abu Dhabi surprisingly not significantly more expensive than Porto, at USD 2,961 per sq m, and far less expensive than, for example, Singapore at USD 19,269 per sq m4. Another survey put Dubai at USD 5,918 per sq m by comparison to Lisbon at USD 4,749 per sq m5. So far as freehold prices are concerned, the UAE is evidently competitive even with Portugal, and at an advantage in contrast to comparably developed international cities. Retirees accustomed to space and luxury will no doubt take note. Straightforward and available freehold property is not the only possibility, however. Some OECD countries have been experimenting with specialised retirement real estate for some decades now. But until relatively recently, there has been little choice for the elderly but to move into aged care when they became ill. Now, however, a range of new financial engineering techniques are creating choices that may present opportunities for developers in the UAE. One concept that has been proven in Australia is that of the retirement village, where residents sign agreements which include a fee payable on exit, known as the Deferred Management Fee (DMF). The DMF pays for the community’s facilities, such as gyms and swimming pools as well as a future populated by Google Home automation and tech support. Future UAE versions will likely encompass interconnected living and recreation spaces, seamless transport connections, and a raft of financial plans connected with the UAE’s tourism offering generally. In such schemes, the developer’s profit is divided between an initial return on construction and a much larger, but deferred, return when retirees eventually sell their units. Relatively well-capitalised UAE developers are well-placed to produce schemes of this type. The market is potentially sizeable: the proportion of Australian residents over the age of 65 living in retirement villages is 6.7% in Queensland, with penetration rates increasing for those over the age of 75.6 In more tailored versions of the product, residents can move from independent living to assisted living and then to dependent living within the same community. As one market leader says, “The promise we make is that, when you move into an LDK Seniors’ Living village, you won’t have to move again7”. But this is a capital-intensive approach which shades off into long-term care and medical tourism. In the Netherlands, by contrast, there has been a growing interest in ‘ageing in place’ – a style of housing pioneered by Dutch aged-care organisation Humanitas with its ‘Apartments for Life’ complexes. The intergenerational living environment of Humanitas consists of six students and 160 elderly residents. Intergenerational living revives traditions familiar to the elderly in the Middle East, and it works – Humanitas says that it has reduced the proportion of residents needing high-level care from 40% to 5%.8.
4
Numbeo (2019) Price Rankings by City of Price per Square Meter to Buy Apartment in City Centre (Buy Apartment Price). Available at https://
www.numbeo.com/cost-of-living/city_price_rankings?itemId=100 Retrieved 25 November 2019. 5
Global Property Guide (2019) The World’s Most Expensive Cities. Available at: https://www.globalpropertyguide.com/most-expensive-
cities Retrieved 25 November 2019. 6
Boucher, D. L. (2019) What is the Future of Retirement Living and Aged Care? Urban Developer 2 September 2019. Available at: https://
theurbandeveloper.com/articles/what-is-the-future-of-retirement-living-and-aged-care Retrieved 26 November 2019 7
LDK (2019) One Move Promise. Available at: https://ldk.com.au/about/one-move-promise/ Retrieved 26 November 2019
8
Arendtshorst, M.E., Kloet R. and Peine, A. (2019) Intergenerational Housing: The Case of Humanitas Netherlands. Journal of Housing For the
Elderly 33(3), 244-256. Available at: https://www.tandfonline.com/doi/full/10.1080/02763893.2018.1561592 Retrieved 26 November 2019.
3
RETIRE IN THE UAE?
Retirement complexes may equally be based on rental models, where residents sign conventional tenancies. With an increasing proportion of professionals renting as a long-term option, this segment of the market is set to expand worldwide. Credit-scoring of residents inevitably depends on retirement income, but it would seem possible for UAE retirees meeting the current eligibility criteria to use a combination of rental income from their UAE property and their existing income to afford very high-quality retirement rental facilities indeed. Whilst some investors have chosen to capitalise rental flows, UAE real estate companies have substantial experience in managing compounds and other rental communities. We can expect them to produce some spectacular retirement communities in due course. If yields in Australia can reach 6-8%, then those in the UAE can expect to attract at least similar returns, quite possibly better. What the UAE is evidently seeking to avoid, however, is the lower end of the retirement market, characterised in Australia by the Manufactured Home Estates segment.
Conclusion Unlike Australia or Portugal, the UAE has only just begun its journey as a retirement destination. Only the very first few tentative policy steps have been taken. The UAE’s population is young, with only 1.5% currently over even 65. Development will not happen overnight. But if even a relatively small percentage take advantage of the potential opportunity to retire in the UAE, the possibility will exist for the development of contemporary retirement villages and associated financial strategies, both for retirees and investors. Watch this space.
4
RETIRE IN THE UAE?
DUBAI
ABU DHABI
SHARJAH
MUSCAT
2205 Marina Plaza
605 West Tower, Abu Dhabi Mall
1801 Sarh Al Emarat Tower
Villa 836, Way 3012
Dubai Marina
Tourist Club Area
Buhaira Corniche Street
Al Sarooj
P.O. Box 118624
P.O. Box 126609
P.O. Box 38583
P.O. Box 3438
Dubai
Abu Dhabi
Sharjah
Muscat
United Arab Emirates
United Arab Emirates
United Arab Emirates
Sultanate of Oman
T: +971 4 453 9525
T: +971 2 448 4677
T: +971 6 715 0444
T: +968 24 694 150
Disclaimer: The information and analysis contained in this report is based on information from a variety of sources generally regarded to be reliable, and assumptions which are considered reasonable, and which was current at the time of undertaking market research, but no representation is made as to their accuracy or completeness. We reserve the right to vary our methodology and to edit or discontinue the indices at any time, for regulatory or other reasons. The report and analysis do not purport to represent a formal valuation of any property interest and must not be construed as such. Such analyses, including forward-looking statements are opinions and estimates only, and are based on a wide range of variables which may not be capable of being determined with accuracy. Variation in any one of these indicators can have a material impact on the analysis and we draw your attention to this. Cavendish Maxwell and Property Monitor do not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this report.