Leasehold to Freehold: When Conversion Does Not Pay

In the last 24 months, 12 leasehold units above AED 5,000,000 sold in Dubai. Freehold recorded 10,769 sales in that same bracket over the same window.

That is one high ticket leasehold resale every two months, across the entire emirate.

If you own a valuable leasehold property and you intend to sell it, that gap is the argument for converting. If you do not intend to sell it, the same gap is close to irrelevant to your position, and whatever a conversion would cost you is money with nothing to earn it back.

This post covers the second case. Our separate walkthrough on how to convert leasehold to freehold in Dubai deals with the mechanics. What follows is how to decide whether to pursue it at all.

Registered DLD sales, units only, last 24 months, AED 300,000 to AED 50,000,000, floor area above 20 sqm.

| Tenure on the record | Registered sales | Median price | Median per sqm |

| Leasehold | 4,228 | AED 686,980 | AED 9,154 |

| Freehold | 232,367 | AED 1,321,106 | AED 18,231 |

| Not recorded | 52,619 | AED 1,100,000 | AED 17,644 |

Freehold volume is about 55 times leasehold volume. Freehold clears at roughly double the leasehold rate per square metre.

Now the part that usually gets skipped. These are two different populations of property, not one property measured twice. The buildings behind the freehold row are not the buildings behind the leasehold row. They sit in different places and they are different kinds of stock. The per square metre gap describes what that stock is and where it stands. It does not measure what a change of title would do to your property.

So nobody can honestly tell you that converting doubles your value, or adds a set percentage, or earns you a specific number of dirhams. We will not tell you that either. Any adviser who pulls a per property uplift figure out of that table is misreading it, and you are the one carrying the loss if the figure is wrong.

The third row deserves attention as well. 52,619 sales carry no tenure flag at all. The split above comes from a field that is not always completed.

Rent behaves the same way. Registered Ejari contracts, units, last 18 months, AED 15,000 to AED 2,000,000 annual: 74,430 leasehold contracts at a median of AED 57,750, and 101,180 freehold contracts at a median of AED 69,695. Freehold sits about 21% higher. Different buildings in different places again, not a rent increase that follows a change of title.

Take the uplift claims away and one argument survives. It is a good one.

The freehold market is deep. 232,367 registered sales in 24 months is a buyer pool that renews constantly, at every price point.

The leasehold market is thin, and at the top of the market it barely exists. 12 sales above AED 5,000,000 in two years. The median freehold sale in that bracket was AED 7,378,000. The median of those 12 leasehold sales was AED 16,100,000, which tells you they are unusual assets rather than a working market with comparables.

Thin markets cost you at the exit, in ways that never show up in an asking price. You wait longer. You do not choose your timing. You take the buyer who turns up instead of the best of several.

That is a problem worth solving, if you are going to sell. It is worth nothing to solve if you are not.

We will not publish a payback figure, because no payback figure transfers from one property to another. Every input has to come from your property. Here is the arithmetic to run.

What it would cost for your specific property. Not a market range and not an average. A figure for your plot, in writing, with every associated cost included. Until you hold that number, there is nothing to calculate.

The remaining term on your lease. Confirm it for your property rather than working from an assumption. A long remaining term and a short one are different assets, and they behave differently in front of a buyer.

Your holding period. The number of years until you actually sell, stated honestly. Not "eventually".

Whether you intend to sell at all. If the property passes to your children and stays in the family, the liquidity argument does not apply to you.

Then the test. Whatever you spend has to come back inside your holding period, through a higher sale price, a faster sale, or a wider set of bidders. Price the property as it stands today from registered transactions in your own building and your immediate streets, not from the emirate wide medians in the table above. If you cannot describe the specific buyer who pays you more because the title changed, the calculation has already failed.

You are holding, not selling. The entire case for conversion is a resale case. With no plan to sell, you would be buying an option you never exercise, and the money leaves the property permanently.

The number is large and your horizon is short. Whatever you spend, you spend now. Any benefit arrives at sale. A short holding period gives you no time to spread it and no room for the market to move in your favour.

Your building trades badly regardless of tenure. Pull the registered sales in your own building, and in the ones beside it, over the last 24 months. If almost nothing moves, and freehold units nearby also sit unsold, tenure is not what holds your property back. Changing the tenure on a property nobody is buying leaves you with a property nobody is buying.

Nobody has confirmed your plot. Eligibility depends on the individual property, so it has to be confirmed for yours. Until your plot has been checked and priced, every model is a guess, and paying to model a guess is money with no return.

Two facts decide this, and both are specific to your property. Get the position on your plot confirmed for that plot, and get any cost in writing. Everything in the method above follows from those two.

If you plan to borrow against the property, ask your own bank in writing what it would lend in each case. Get that answer from them before you commit money, not after.

Send us the building and your title details. We will pull the registered transaction history for your building and the streets around it, tell you what your property realistically sells for as it stands, and tell you whether any conversion cost has a credible route back inside your holding period. When it does not, we will say so, and that is the answer more often than owners expect.

Oliva is a Dubai brokerage with no paid placements.

Oliva Research, Market Intelligence Team. RERA BRN 1573501. DLD Broker Card 92025. Figures in this post come from registered Dubai Land Department sales transactions and registered Ejari contracts, filtered as stated in each section.