Spanish investors have stopped looking at the Costa del Sol. While developments in Marbella, Estepona and Fuengirola accumulate unsold stock, capital is flowing towards a destination that five years ago seemed exotic: Dubai. The figures confirm it: net returns of 10% compared to Spain’s 4–5%, zero taxes on capital gains and projects that promise to appreciate by 40% before 2030. The problem is not that Dubai is more attractive; it is that Spain stopped being so.
The trend accelerated in January 2026, when the main Spanish real estate advisors reported a 35% drop in enquiries for domestic premium projects. At the same time, demand from Spanish investors in developments such as Creek Harbour and Ramhan Island grew by 180% year-on-year. The Arab market is not just competing: it is winning the battle for European capital that used to finance high-end residential in Spain.
Why Dubai is booming while Spain is slowing down
The contrast is brutal when you compare operating conditions. Dubai offers guaranteed returns of 10% during the first years of operation, zero taxes on rental income and an automatic Golden Visa for investments above 500,000 euros. Spain, for its part, applies progressive personal income tax that can reach 48%, increasingly strict restrictions on holiday rentals and a regulatory framework that changes every six months depending on which party governs your region.
Data from January 2026 reveal the structural shift the market is undergoing:
- Creek Harbour records 10% returns verified in corporate rental contracts with guaranteed 92% occupancy during the handover phase
- Palm Jumeirah maintains CAP rates of 3.1% but offers immediate liquidity on resale with an average of 45 days between listing and closing
- Ramhan Island promises 40% appreciation in five years with handovers scheduled for 2029, capturing 67% of European investors that previously looked at the Mediterranean coast
- Al Mushrif in Abu Dhabi provides 7–12% returns with mixed-use developments that diversify risk between premium residential and strategic commercial spaces
The tax framework changes everything. A Spanish investor who buys in Marbella for 800,000 euros and rents for 48,000 a year pays up to 23,040 euros in income tax at 48%. The same profile buying in Creek Harbour for the same amount and obtaining 80,000 euros a year pays zero tax on rental income, pocketing the full 80,000 euros plus guaranteed appreciation potential.
Arab investment: How this affects the Spanish premium market
Faced with this scenario, Spanish developers are dealing with a problem that has no immediate fix: the domestic premium segment has lost its value narrative. Investors who once saw Marbella as a safe haven now discover that Dubai offers comparable stability with three times the returns. Pre-sales in developments in Malaga, Alicante and the Balearic Islands are stretching from three months to nine, while comparable projects in the Emirates sell out in the off-plan phase.
The consequences are already hitting the sector. Developers that launched projects in 2024 with 60% pre-sales are now struggling to close the remaining 40%, forced into 12–15% discounts that erode margins. Institutional investors that used to allocate 70% of their real estate capital to Spain cut their exposure to 45% in the last quarter of 2025, reallocating towards the Emirates, Portugal and even secondary Asian markets. The Spanish luxury segment has not collapsed, but it is no longer a priority in sophisticated portfolios.
The impact goes beyond sales. Construction of premium projects on the Spanish coast fell by 23% year-on-year according to new-build permit data in tourist municipalities between October 2025 and January 2026. Developers are postponing launches until the “regulatory framework becomes clearer”, a euphemism hiding the reality: no one wants to compete against a market that offers double the return with half the tax friction.
What this reveals about the structural shift
Beyond the sensationalist headline, this phenomenon exposes a profound reconfiguration of the European real estate investment map. For decades, Spain capitalised on its climate, infrastructure and political stability to attract capital. Dubai has shown that these attributes are not enough when tax differentials exceed 30 percentage points and the regulatory framework changes every legislative term.
The comparative analysis of 2025 vs 2026 reveals worrying patterns. Enquiries from high-net-worth Spanish investors for domestic projects fell from 68% in January 2025 to 42% in January 2026, while those directed at advisors specialised in the Emirates rose from 14% to 39% in the same period. Family offices with a tradition of investing on the Mediterranean coast are diversifying towards jurisdictions with zero taxes and predictable regulation. The question is no longer “Why Dubai?”, but “Why stay in Spain?”.
This behavioural shift is hitting Spain’s upper-mid market indirectly. If premium projects lose traction, construction companies reduce output, which makes developable land more expensive and compresses margins in more affordable segments. The domino effect is only just beginning: January 2026 is the month when the trend went from anecdotal to structural, cementing Dubai as the preferred alternative to traditional European markets.
What to expect in the next 18 months
Looking ahead, Spain’s premium market will face growing pressure as long as it fails to resolve its fiscal disadvantage. Dubai megaprojects scheduled for 2027–2029 (Zabeel District with an additional 17.7 million m², phase II of Creek Harbour, expansion of Ramhan Island) will consolidate Emirati supply just as Spain needs to attract capital to reactivate post-election construction. The window to react is narrowing.
The next steps depend on three actors. Investors have already voted with their portfolios: 2026 will be the year when capital flight towards fiscally efficient jurisdictions becomes the norm rather than the exception. Spanish developers will have to reposition towards the mid-market with 6–7% returns, abandoning the illusion of premium product without a fiscal edge. The legislator has 12–18 months to design incentives that offset the competitive gap or accept that Spain’s high-end residential segment will be a secondary market over the next decade.
In the meantime, Creek Harbour is adding 4,200 units in 2026, Palm Jumeirah is maintaining 95.5% occupancy in the A segment, and Madrid–Dubai direct flights are operating at 87% capacity with executives flying out to sign off-plan reservations. The exodus is not a passing trend: it is the new normal for European capital that has learned to read tax balance sheets.
Key questions to understand everything
Q: Is it legal for Spaniards to invest in Dubai without paying tax in Spain?
A: Yes, if you are fiscally resident in the Emirates for more than 183 days a year or structure the investment through legal vehicles in the local jurisdiction.
Q: What happens if Dubai regulates holiday rentals like Spain did?
A: The Emirati government guarantees regulatory stability through 99-year contracts with developers, and its economic model depends on attracting foreign capital.
Q: Are 10% returns realistic or just marketing?
A: They are verifiable in projects with guaranteed corporate contracts (Creek Harbour, Mina Zayed), but they depend on the purchase phase and type of unit.
Q: How much minimum capital do I need to invest in Dubai?
A: From 420,000 euros in Creek Harbour with local financing, or 800,000+ for premium options in Palm Jumeirah with a Golden Visa included.
