Retire in the UAE - 2020 Update

Retire in the UAE - 2020 Update

Julian Roche Chief Economist

What a difference a year makes Dubai has announced a new retirement visa for people aged over 55. Whilst the criteria of income, savings and investment seem to remain the same as the UAE visa announced in 2018, the new retirement visa launched by the Dubai government specifically promotes the emirate as a retirement destination. Also, the new visa is open to non-residents whilst the earlier one targeted residents only.

In 2019, I argued that the renewable five-year UAE retirement visa was very likely indeed to make the UAE competitive against traditional retirement destinations such as Australia and Portugal.

I pointed out that there were already some three million expatriates living and working in Dubai alone, with a similar number in the other emirates, that a growing number of those were approaching retirement age and that not all of them will want to return ‘home’ to countries where they no longer have strong connections. Many will want to pass on their businesses to their children and build inter-generational families living in the UAE. My argument then was the new visa marked the entry of the UAE into the international retirement market.

This year, the Dubai government has stepped up its offering, reaching out not just to residents of the country who have worked in Dubai for more than 10 years, but now potentially also to residents of other countries to retire here. The financial conditions remain the same as the retirement visa introduced in 2018: requirement to invest in property worth at least AED 2 million or maintain investments of at least AED 1 million or generate monthly income of over AED 20,000.

Mortgages do not have to be repaid by 65, so there is the possibility to gear the necessary investment. Since 2018 too, UAE real estate has become more affordable, so the investment buys more living space and higher quality real estate. In terms of the attractiveness of potential real estate investment, even the average London homeowner, for example, could move to Dubai or Abu Dhabi with enough to spare to buy an income-generating apartment. Investment property in the UAE also earns higher gross yields than in European countries—on average one and a half times that achievable in London—and without tax, net yields are even higher. The retiree from London would still get much more space: price per sq m is around four times more expensive there than Dubai or Abu Dhabi. Comparable offerings in traditional retirement destinations such as Portugal, Cyprus or even Australia are largely outside cities, whereas the UAE, Dubai and Abu Dhabi specifically, offers vibrant world-class urban life. Lifestyle offerings such as beaches and golf courses and the possibility of employing full-time house help or nursing care—a helpful option for retirees—are key advantages of retiring in the UAE.

Healthcare: the crucial parameter Crucial to the long-term success of ‘Retire in Dubai’ will be the management of personal healthcare costs. A valid healthcare plan is and will no doubt continue to be a condition of the Dubai retirement visa, but the latest update allows the applicant to choose a suitable medical insurance plan after the medical test is conducted and approved.

Whilst there are a number of competing providers and plenty of world-class facilities, for example in Dubai Healthcare City (DHCC), costs are still a very significant factor in decision-making.

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RETIRE IN THE UAE - 2020 UPDATE

Fidelity estimated that an average couple retiring at age 65 would need approximately USD 295,000 (≈AED 1.08 million) set aside for healthcare for the remainder of their lives1. Little wonder therefore that retirement healthcare premiums in the UAE can range from AED 18,000 up to AED 55,000 annually.

Whilst the income from a leased apartment is sufficient to cover this, costs are magnified in case of a prolonged stay at an aged care facility. One obvious solution is an income stream reverse mortgage, which is available within the UAE for those over age 60. The development of a specialised retirement reverse mortgage and even associated retirement villages along Australian or European lines, but more architecturally diverse and attractive, are logical next steps to ensure that retirees can spend their active years and beyond comfortably in the UAE.

Increased competitiveness compared to other countries Other countries are moving in the opposite direction. Since 2018, Australia, for example, no longer offers the 405 Retirement Visa. The visa allowed people over the age of 55 years with no dependent children, a designated investment of AUD 75,000 (≈AED 200,000) in Australia and an annual income of AUD 65,000 (≈AED 170,000) to live and work in the country for up to four years, renewable thereafter. There were pathways to permanent residency and even citizenship. The popular visa, first offered in 2005, encouraged retirees to settle in regional areas where the required investment was AUD 500,000 (≈AED 1.3 million) and the required annual income was AUD 50,000 (≈AED 130,000). In sharp distinction, potential retirees are now being directed into much more difficult, time-consuming and potentially expensive paths, such as becoming shareholders in businesses2. Direct investment in real estate is no longer an option.

Just as dramatically, the UK’s imminent departure from the European Union has removed the automatic right for UK citizens to retire in EU countries. Even for those UK citizens already retired in EU countries, such as Spain and Portugal, there will be tax implications, particularly for those with property outside their country of residence; concerns over access to health care, which will no longer be automatically reciprocal as it was when the UK was an EU member; as well as risks to UK pensions paid to retirees in the EU, which in the past have escalated with inflation but will no longer do so.

Visas themselves have altered only in some cases. Whilst some well-known citizenship-by-investment programmes such as those in Saint Kitts and Nevis, Antigua and Barbuda, and the Commonwealth of Dominica and Saint Lucia have responded to the COVID-19 pandemic by lowering their required investment amounts by an average of 15%, EU countries have not yet acted. The Portuguese D7 retirement visa has always mandated that retirees spend five years in Portugal before they are granted permanent residence, and this will from next year apply to British citizens along with retirees from outside the EU. The financial conditions are also unchanged and the real estate route requires only the purchase of newer property worth 500,000 euros (≈AED 2.2 million), or older property of just 350,000 euros (≈AED 1.5 million). However, obtaining the D7 visa is an administratively complex process, with no fewer than 11 separate steps3, which show no sign of being simplified.

1

Fidelity (2020) How to plan for rising health care costs. 8 March 2020. Available at: https://www.fidelity.com/viewpoints/personal-

finance/plan-for-rising-health-care-costs Retrieved 15 September 2020.

2

Sterling Migration (2020) Emigrating to Australia over 45 years old. Available at: https://sterlingmigration.com/australian-retirement-

visas-explored/ Retrieved 15 September 2020.

3

Lameres, Capela et Associados (2020) President Returns Changes to Nationality Law to the Parliament. 6 August 2020. Available at:

https://lamarescapela.pt/en/news/ Retrieved 15 November 2020.

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RETIRE IN THE UAE - 2020 UPDATE

Conclusion Countries such as Australia and Portugal work on the assumption that retirees will seek permanent residence and eventually citizenship in order to access the generous public healthcare services that place such a stress on public finances. At a time when public finances have been stretched in a way not seen for decades, it is inevitable that governments will continue to scrutinise retirement visas: the Australian decision may yet be copied elsewhere. By contrast, the UAE has always chosen a different set of policy settings for permanent residents, which safeguard public finances but demand personal or family responsibilities for healthcare in particular. This factor might be a hindrance for lower-income retirees in choosing the emirates as a retirement destination.

However, the concept of a retirement visa is changing. Retirement visas, just like healthcare plans, are now being envisaged as consumer products by some retirees. Talk now has therefore moved to acquiring the UAE retirement visa, rather than meeting the requirements of the visa. It is a subtle shift, perhaps, but an extremely important one. The UAE is well placed to chase the silver dollar in an essentially free and competitive international market for retirement visas.

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RETIRE IN THE UAE - 2020 UPDATE

DUBAI

ABU DHABI

SHARJAH

MUSCAT

MANAMA

2205 Marina Plaza

605 West Tower, Abu Dhabi Mall

1801 Sarh Al Emarat Tower

Villa 836, Way 3012

Office 906, Floor 9Â West Tower

Dubai Marina

Tourist Club Area

Buhaira Corniche Street

Al Sarooj

Bahrain World Trade Centre

P.O. Box 118624

P.O. Box 126609

P.O. Box 38583

P.O. Box 3438

P.O. Box 1829

Dubai

Abu Dhabi

Sharjah

Muscat

Manama

United Arab Emirates

United Arab Emirates

United Arab Emirates

Sultanate of Oman

Bahrain

T: +971 4 453 9525

T: +971 2 448 4677

T: +971 6 715 0444

T: +968 24 694 150

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