The Dubai real estate market has shown consistent growth and positive yield trends over the past three years, with several prominent areas leading the way in attracting investors and homebuyers. But one question many do not ask is ‘How can rental yield benefit future investments choices?’
For most investors searching for secondary income comes purely through property investment, and rental yield is the most important factor to consider as it is the biggest benefit for most. Dubai has proven to consistently stay on the top of its mark with relatively stable and attractive rental yields.
When searching for a desired rate to follow with rental yields, a rule of thumb to follow would be, between 4% and 8%. However, areas like Dubai Studio City in 2023 so far averaged 10.5% ROI according to Allsopp & Allsopp proprietary data. Overall investments in Dubai remain at more attractive rates than other capitals of the world like London with an average of 4.1%, Paris with an average of 2.5% (According to Guest Ready), Singapore 4.7%, Hong Kong 2.8 % (according to Global Property Guide).
Now, what is even more attractive than the long term rental portfolio, is how property owners are taking advantage of the booming tourism industry. The 2023 tourism spending in Dubai has crossed $29 billion so far and with Dubai airport welcoming over 19 million visitors a year, the short rentals industry is taking the lead when returns are in mind. Topping the already great long term rentals, holiday homes return of investment hit the baffling 30% ROIs mark in some areas in Dubai.
Over the past three years, Dubai Marina has remained a popular choice for property investments, with an average yield of 5.8 for long term rentals. The same area sees in short rentals an average starting around 25% to 30% in ROI. Another example is the sought after Dubai International Financial Centre (DIFC) which has been a hotspot for blue colour professionals relocating for Dubai for good or for shorter periods of time in work assignments. Long term yields in this area average 7.5% over the past three years and short term rentals see an average ROI of 20% to 25% according to Sheena Arila, Operation Manager for Holiday Homes in Allsopp & Allsopp.
With the property market in constant rise in Dubai, property investors now continue to look into alternatives of keeping up with the pace of the market and aiming on higher returns with holiday homes is the best alternative to take advantage of the growth the city is experiencing.