Opportunity cost is the question no Dubai broker wants you to ask: what would the same money have earned if it weren’t parked in this apartment?
Opportunity cost is the return foregone on the next-best use of the capital. For a UAE property investor in 2024-2025, the reference alternative isn’t particularly exciting — US Treasuries at 4.2-4.8%, UAE bank deposits at 4-5% on fixed terms, a balanced equity portfolio with a long-run expected 6-7% before tax considerations.
The reason it matters: a Dubai property delivering a 5.0% net yield and 4-6% annual appreciation looks attractive in isolation. Against a Treasury at 4.5% with no service charge, no maintenance, no liquidity risk, and settlement in two days instead of six weeks — the premium you’re demanding from property should price the illiquidity and the operational burden. If the spread is under 300 bps over the risk-free, you’re not being paid for the hassle.
A client last year held AED 700k in cash and was weighing a Business Bay studio versus a fixed deposit. The studio offered about 5.4% net. The bank quote was 4.8%. We worked through time-cost, vacancy risk, and the illiquidity gap. He went fixed-deposit.
Property isn’t always the answer. Know your benchmark.
Related: Holding Cost, ROI, Net Yield, Exit Strategy.