Dubai´s rental real estate: what to invest in for a stable income
Dubai is the administrative centre of the Arab Emirates, the largest city of the UAE and the investment capital of the Middle East. The local real estate market is on the up thanks
According to the Dubai Land Department, the volume of investment in local real estate during the first half of 2016 reached $7.6 billion. The great attraction for investors is the economic stability, the bright prospects
The most popular property types bought by investors for rental in Dubai are residential properties, apartment hotels and offices.
Residential property: how to earn on appreciation
Between 2014 and 2016, prices for residential property in Dubai dropped by 15%, and in Q3 of 2016 they amounted to only 73% of the peak value they achieved in 2008. According to September 2016 data from the Global Property Guide, apartment prices in Dubai range from $4,400 to $6,000 per m². Rental rates have also fallen
However, experts are unanimous in their belief that the market has begun to recover in 2017. In some districts of the city prices keep falling, even though less sharply than before; while in the others they have already reached rock bottom and are now in a growth phase. This means that the optimal time to enter the market has come, given that buying property in Dubai for a relatively low price will allow you to earn as it appreciates in the coming time.
The return on investments from purchases of residential property for rent in Dubai reaches up to around
Renting out a studio brings $15,000 per annum on average,
According to Propertyfinder Group, the apartments yielding the highest returns are those located in the new and developing districts of the city: Sports City, Silicon Oasis, and Discovery Gardens. Local rental yields reach 9% per annum: some of the highest in the world. The maximum yields in the Greens and Jumeirah Lakes Towers districts fluctuate between 7.5% and 8% per annum. Finally, in the most upscale districts with high property prices, such as Dubai Marina and Palm Jumeirah, the average yields are about 6% per annum.
An apartment measuring 55 m² in Dubai Marina costs around $326,000 (including all
Villas are usually less profitable than apartments in terms of leasing. However, exceptions also exist: for example, homes in the Arabian Ranches and the Springs districts yield up to 6.4% per annum and can pay off the initial investment outlay even quicker than certain apartments. Generally, the more spacious and expensive is the villa, the lower the rental income.
Apartment hotels: tourist and business owner demands growing
Dubai is one of the most popular tourist destinations in the world and one of the top locations for shopping and business travel. Over 15 million tourists visited the city in 2016, and by 2020 this number is expected to grow to 20 million people, with around 17.5 million visitors planning to arrive solely for the Expo 2020 which is to be held in Dubai from October 2020 to April 2021.
With the growing tourist flow, apartment hotels
Serviced apartments are
The average annual rental yield from serviced apartments
The best strategy is to buy property from a reliable developer who offers serviced apartments
Offices: top class space in the central districts is always highly prized
The main tendency that characterises
The vacancy rate is higher in certain city districts where residential properties are relatively old. For example, in the Dubai World Trade Centre, it reaches 20%. At the same time, the rental rates in such locations either remain stable or decline. For instance, during Q2 of 2016 alone, they dropped by 18% in the locality of Garhoud near the airport, and by 5% in Deira. Other districts of little promise are the Jumeirah Lakes Towers and Business Bay. Here, the supply of office space exceeds the demand.
In the free economic zones -
Between 2008 and 2016, the rental rates in the Dubai office space market declined
The highest are the rental rates for the new buildings of the International Financial Centre. Prices are growing continuously there and in early 2017 are well on their way to $1,076 per m². However, this is the highest figure there is: the average rental rate for offices in other popular locations amounts
Annual office space rental yields range between 5.5% and 8.5%. Commercial real estate is more profitable in terms of lease than residential properties, that is, as long as the property maintenance costs are paid by the tenants and where the rental period is usually longer.
Due to an economic slump in the market, the demand for office space in Dubai has slowed in recent years, and companies are wary with plans to expand. Small offices are in higher demand. According to data for the first three quarters of 2016, less than 12% of tenants were choosing spaces over 950 m², while a year earlier this figure amounted to 30%. For instance, in the Index Tower skyscraper, located in the Dubai International Financial Centre, four floors were divided into small offices (from 50 m² to 300 m²) and most of them found their tenants immediately. The same strategy worked in Burj Daman.
According to analysts, in the first six months of 2017, the office space market in Dubai
In the 2017 Dubai market, Tranio recommends investing in:
- residential apartments in the districts of Sports City, Discovery Gardens, the Greens, Jumeirah Lakes Towers and Palm Jumeirah;
- apartment hotels
in the newly-builtcomplexes in Dubai Marina and Downtown Dubai; A-classoffice space in the Dubai Internet City, Media City, Knowledge Village, Dubai Design District and the Dubai International Financial Centre.
Julia Gushchina, Tranio.com
Originally published on themarketmogul.com