Since the Dubai Government offered expatriates the right to freehold property in 2002, the Dubai property landscape has changed beyond belief.

Many of those individuals that took the plunge early-on now boast of 300 per cent returns or more on some of their off-plan property deals, causing many current home-seekers and investors to feel that they have missed the boat. But all the signs are that Dubai property is still on the up-and-up.

So where is the smart money going, apartments or villas? Both types of properties have their own merit. In both sectors, powerful and steady demand and the widespread availability of finance from local and international lenders is still driving prices aggressively.

That said, of the 55,000 residential units coming on line next year, just a fraction will be villas. In a relentless property climate, villas are therefore proving to be the hot ticket, specifically in the owner-occupier segment.

Villas

Each year, Dubai represents a land of opportunity for hundreds of thousands of new residents. A continuing surge in demand for family homes is the direct result.

The beauty of a villa is that you and your family can be part of ready made community, and with most developers committed to providing the very best for their residents, most villa developments offer schools, mosques and a wide range of shops and other facilities. This is something that apartment dwellers often do not get.

Capital appreciation for completed and off-plan villas remains very impressive. It is, however, the ‘des-res’ luxury segment that is increasing in price at the most extraordinary pace. Jumeirah Islands in Dubai, for example, has seen increases in price of up to Dhs1m since the start of the summer, and Emirates Hills and Palm Jumeirah villas continue to sell for unprecedented amounts, with no other property world-wide doing as well in the resale market.

At the medium end of the market, Springs, Meadows and Arabian Ranches are hitting an all time price high as well.

A major benefit of a villa purchase for investment purposes is that due to the extreme shortage in supply, prices and leasing potentials are exceptional.

Leasing agents have reported unprecedented hikes in overall rental income of up to 25 per cent since May 2007. And many investors that purchased early are receiving up to 15 per cent annual capital appreciation. The average return on capital investment is still 7-10 per cent, depending on the development.

The disadvantages of buying a villa as an investment are few. However, for the seasoned property investor, the prospect of paying 100 per cent of the original price plus a huge premium for a villa may not be as attractive as buying a property off-plan.

Here, over the medium term, returns on investment can potentially prove to be far more attractive. Off-plan villa projects tend to see their premiums climb at a slower rate though, as villa residents prefer being able to walk though a completed property before purchase when they plan to live there themselves.

Apartments

Apartments continue to perform well, though again, it is primarily the luxury segment of this particular market that is showing strong price improvements. There is little shortage in apartment supply, although the quality of available properties coming on line varies dramatically.

The better quality units set in desirable locations perform best and offering the strongest potential from a rental perspective. Off-plan, pre-launch apartment projects continue to excite overseas investors looking to develop in particular a Dubai property portfolio in the UAE.

Market confidence and the introduction of industry regulations, coupled with the advancement of the freehold law, has encouraged an increasing number of investors. They are increasingly looking at buy-to-let finance solutions because of the extremely vibrant rental market and prospective returns on completion of their properties. The growth in rental returns for apartments are, in general, clearly stronger than villas, ranging from 8-12 per cent.

The rule of thumb in the current market is that a villa purchase will bring you a strong capital appreciation, and an apartment will produce the best return on investment.

Property returns across the emirates vary, because of the different stages of property development each is at, combined with their desirability. But in Dubai, the most developed UAE market, the average premium for a completed off-plan villa is 90 per cent and the average premium for an apartment that is bought off plan is 60 per cent – demonstrating the comparison.

Either way, the property boom is far from over and any foray into the property market at this time can be approached with confidence providing you have done the groundwork.