At Sandwater, we often hear the same question from investors:
“Where should I put my money – Dubai, Oslo, or somewhere else in Europe?”
It sounds straightforward, but once you factor in financing rules, equity requirements, and taxes, the answer becomes much more nuanced.
Let’s explore.
Dubai: The Yield Champion
Dubai has built a reputation for strong rental returns. Typical apartments deliver 6.5–8% gross yield, which translates to around 5–6% net after service charges and occasional vacancies.
On top of that, there is no income tax on rents, no annual property tax, and the system is landlord-friendly. Demand is also underpinned by rapid population growth and a liquid property market.
The trade-off is upfront cost. Transaction expenses run 7–8%, largely driven by the 4% Dubai Land Department fee. And equity requirements are high, usually 50% or more for international buyers.
For investors with the capital to deploy, Dubai is compelling for cash yield and tax efficiency.
Oslo: Stability Meets Leverage
At first glance, Oslo looks modest. Yields average 3.5–4% gross, and closer to 2–3% net after tax and costs. Norway taxes rental surplus at 22%, and there is also property tax on homes. Rent growth is capped, tied to inflation.
But Oslo offers what Dubai does not: high leverage with low equity requirements.
Banks commonly allow purchases with 10% equity, and in some cases even less if another property is pledged as collateral. That means a NOK 5 million apartment could be bought with just NOK 500,000 in cash.
However, financing costs change the picture dramatically. With mortgage rates above 5% p.a., annual interest on a NOK 4.5 million loan can easily exceed NOK 225,000–250,000. That means many landlords experience negative monthly cash flow, even if net rental income before interest looks healthy.
The leverage still makes Oslo attractive for some investors, but the strategy is more about long-term appreciation than positive monthly yield.
The Rest of Europe: Regulation and Restraints
Across cities like Stockholm, London, Paris or Berlin, yields usually fall to 2–4% gross. Rent caps are strict, and transaction costs are often higher due to stamp duties and notary fees.
These markets add diversification, but net returns after tax and regulation often end up lower than in Oslo.
The Game Changer: Interest Rates
Financing is where the comparison really shifts.
- In Norway, mortgage rates above 5% eat up much of the rental surplus. Many landlords operate at a monthly loss, relying instead on capital appreciation.
- In Dubai, expat mortgage rates are around 4%. Because investors typically put down much more equity, financing costs are a smaller portion of total returns. This allows positive cash flow to be more common, even with similar interest rates.
The core trade-off is this:
- Oslo = lower yield, high leverage, weaker cash flow.
- Dubai = higher yield, high equity, stronger cash flow.
An Example: Oslo vs. Dubai
Let’s compare a NOK 5 million apartment.
- Oslo:
- Equity required: NOK 500,000 (10%).
- Gross rental income: NOK 175,000–200,000 per year.
- Net rental income after tax and costs: around NOK 125,000.
- Mortgage: With 5%+ interest on a NOK 4.5 million loan, annual interest is NOK 225,000–250,000.
- Result: Negative monthly cash flow, but thanks to low equity, the leverage effect can still deliver a high return on equity if property values rise.
- Dubai:
- Equity required: NOK 2.5 million (50%).
- Net rental income: around NOK 275,000 per year.
- Mortgage: Lower relative to property value, meaning interest costs don’t erode returns as heavily.
- Result: 11% return on equity, with stable positive cash flow and tax-free income.
So, Where Should You Invest?
There’s no one-size-fits-all answer.
- Dubai works if you want tax-free income, higher yields, and landlord-friendly rules – and if you have the equity to commit.
- Oslo works if you want stability and the ability to maximize return on equity with little cash upfront – but you must accept weaker or negative monthly cash flow.
- Other European cities provide diversification, but investors need to accept lower net returns and tighter regulation.
Sandwater’s Approach
When advising clients, we always ask three key questions:
- How much equity do you want to put down?
- What’s the true net yield after taxes, costs, and financing?
- Are you looking for monthly cash flow, or mainly long-term appreciation?
Often, the best solution isn’t choosing one. It’s mixing both: Dubai for yield and global exposure, Oslo or Europe for stability and leverage.
At Sandwater, our advice is always free. If you’d like us to run the numbers for your situation, we’d be happy to help you see where your capital works hardest.
