Why invest in Dubai property?

Dubai, an emirate in the United Arab Emirates, is currently undergoing a rapid transformation - with a variety of hugely ambitious development projects underway.

The location will soon host the three largest man-made islands in the world - the Palm Islands - which are being built off its coast. The self-proclaimed 'eighth wonder of the world' - the islands are expected to maintain Dubai's position as a premium tourist destination.

Another development is the Dubai Creek. It will feature seven landscaped islands all interconnected by bridges. The islands will host residential buildings, shopping centres, office buildings and marinas - as well as an art gallery, opera house, museum, planetarium and theatre.

The emirate is also installing a new rail system, the Dubai Metro, which will have two lines connecting strategic locations across the region. The first trains will begin operating in the summer of 2008 and should be transporting 1.85 million travellers per day by 2020.

In 2006 the emirate legalised foreign ownership of property in certain designated areas of Dubai - giving property buyers a freehold of the title as well as the opportunity to sell or lease without restriction.

The region's property market is fast moving and yields are high at present, standing between eight and 13 per cent. Because of this, the emirate remains a solid long-term buy as there is still room for growth in the market and because a rental property will cover its mortgage payments from day one.

Tenancy laws in Dubai are weighted towards the tenant somewhat - with rent increases capped to seven per cent per year. Transaction costs are very low however - standing at between four and six per cent of the total property value.