Information Asymmetry and the Rise of Expat-Focused Real Estate Brokerages

Economic Principle: Information Asymmetry (Akerlof’s Market for Lemons)

Definition: Markets in which buyers and sellers do not have equal information about what is being traded suffer from inefficiencies and mistrust.

The Dubai Real Estate Model and the Expat Clientele

In Dubai, a magnet for global property buyers, foreigners make up nearly 90 percent of the population, and they dominate the city’s property market. But these overseas buyers often work in the dark, lacking insight into local laws or tax and visa rules, or even actual market value of real estate. That constitutes a textbook example of information asymmetry in which the buyers are at a disadvantage. 

In the “Market for Lemons” theory developed by Akerlof, when buyers can’t accurately gauge quality because they don’t have access to the right information, the market gets overrun by low-quality goods—or in this case, overhyped properties or lousy long-term investments. Sellers, or agents, that happen to know more will find it tempting to extract profit in the short term, but they risk damaging trust and thus harm their long-term business.

In environments like that, having informed, expat-focused brokerages around isn’t just helpful—it is economically indispensable. These companies aren’t just in the business of peddling square footage. They help international clients to acquire good properties that fit into broader financial and legal strategies, reducing uncertainty and risk.

Why the Information Gap Exists

Real estate investment is particularly tricky for international buyers for a number of reasons:

Tax Challenges: It is very tedious for foreigners to pay taxes on rental income, capital gains, or estate transfer because the rules vary depending on the bilateral treaties or the type of domestic tax code.

Visa Implications: While many countries grant property-linked visas (like Dubai’s Golden Visa), the thresholds and timelines are not always clear.

Inheritance and Ownership Law: Some countries limit foreign ownership or forced heirship rules that may be unknown to unsuspecting purchasers.

Brokerages that cater to expats are working to fill this gap—not just by selling, but also by educating. They are, in some ways, hybrid advisors, and often refer clients to tax experts, legal counsel, or immigration specialists to make sure purchases make sense across borders.

Value Creation Through Information

Brokerages that focus on expatriate clients can charge higher fees not for getting them a better deal, but for their ability to reduce transaction risk. In the 2023 Global Cities Survey report from Knight Frank, more than 45% of high-net-worth buyers listed “regulatory and tax understanding”—based on the ownership structure they plan to use—as a No. 1 worry when purchasing internationally.

Let’s take a look at the firm Betterhomes in Dubai. It has essentially developed an entire practice specialty around international clients, providing multilingual agents, tax consulting, and legal advisory through partners. Their value isn’t just easy access to inventory—it’s in the risk reduction.

Or consider Portugal, where real estate companies targeting Golden Visa investors offer packaged legal, financial, and investment services. These firms aren’t successful because they can sell well. They succeed because they simplify the often-overwhelming complexities across the entire process.

Ramifications: A Market That Rewards Expertise Over Hype

The main implication is this: in high-information-gap scenarios, expertise becomes the value proposition. This clearly challenges the stereotype that estate agents only work for commission.  In markets dominated by expats, the winning brokerages are those that act as information intermediaries.

It’s also putting pressure on traditional, generalist brokerage firms. Without a deep stack of cross-border knowledge, they leave themselves vulnerable to extinction from the most profitable market segment.

Conclusion

With an increasing globalization of real estate markets, the economic implications of information asymmetry manifest itself in the entire brokerage economy. Firms that reduce uncertainty, not just close deals, add the most value. And in places like Dubai—where 99 percent of a brokerage’s clients may not even reside in the country—that’s not a niche, it’s the game.

In such a landscape, clients are paying for more than just keys. They are paying for trust, clarity, and the capacity to find good properties in unknown terrain.