The short-term lettings industry is set to rise in Dubai
Why landlords should consider short-term lettings
There are huge opportunities in short-term lettings, not only with short-term letting operators but also for landlords. Short-term lettings are a great option for landlords looking for a high return on investment (ROI) - in many cases, it will be higher than that of an annual rent.
For owners who own a second property and are looking for flexibility they should consider letting the property short-term. By doing this, they can have access to the property when they decide to whilst still receiving an income from it when it is not occupied by themselves or their family and friends.
With having a property let on a short-term basis, landlords get their property managed by the short-term lettings operators which takes a lot of stress and worry away whilst they earn rental income and still get to use the property themselves. They can expect all bookings, guest relations, maintenance and upkeep of their property to be handled removing the stress and worry.
The effects of Covid-19 on the short-term lettings industry
The pandemic has had a huge impact on travel and tourism and the industry has seen many cancellations, a significant reduction in bookings and, of course, an uncertainty for the future. However, short-term lettings is an industry that is recovering well due to the anxiousness of travellers. People who are travelling for business and with their families are looking to stay in private accommodation - they are opting against hotel stays to avoid overcrowding. Some travellers are looking to enjoy the comforts of a home from home.
We have seen many residents within the UAE book short stays in Dubai from other emirates such as Ras Al Khaimah, Abu Dhabi and Fujairah. Short term lets are often more affordable than a hotel stay. A one-bedroom suite in a hotel would cost a lot more than a one-bedroom apartment and you could even get three or four bedrooms for the same price as a hotel stay in a luxury room.
Short-term lettings give guests the opportunity to cook their own food and keep their social bubble small whilst still feeling as though they have had a holiday and a break from their usual surroundings.
Landlords opting in favour of short-term lettings in 2020
I was expecting landlords to retreat from short-term lettings and rent their properties out annually - a lot of homeowners in Dubai own properties for investment purposes and choose an annual income. However, due to the pandemic, annual rental prices have dropped. In 2020, Allsopp & Allsopp Real Estate recorded a 9% reduction in the average rental price of a property in Dubai compared to 2019 suggesting the market is now in favour of the tenant. Landlords have the chance of achieving higher revenue from renting out their property short-term when compared to the current rental price for an annual lease. Homeowners also have the flexibility to cease the short-term let contract if they decide to reside in the property themselves, rent their property out annually when the price increases or if they wish to sell the property. Letting a property on an annual basis would mean that the landlord would have a rental price ROI locked in for at least a year and sometimes quite a bit longer.
Leisure properties increase in 2020
There are a lot of listings in Dubai which cater to corporate business - many apartments are available for short-term lets. However, accommodation for leisure has lifted in 2020 - there has been an increase in demand for leisure when compared to corporate last year. This lift could be down to the pandemic and how residents are navigating through tough times. Many residents have expressed an interest in short-term lettings as they face uncertainty about their job and their future in the city and are giving themselves a little time to decide by renting monthly as opposed to signing a lease contract for a year.
Villas becoming increasingly popular for short-term lettings
There has been an increase in villas coming available for short-term lets because many guests are coming to visit Dubai with their families and are looking to stay as safe and private as possible. Guests are looking to be secluded in a property with no communal areas, some outside space and sometimes a pool, so the demand is there. I have noticed an increase in luxury properties being listed for short-term lets because of the low annual rental prices. Recently, we had a property available on the Palm Jumeirah that was valued at AED 500,000 for annual rent and after a couple of months, the rental price had gone up to AED 800,000.
So, in the market that we are in at the moment, landlords of luxury villas are leasing their property short-term and keeping a close eye on the projected annual rent in the hope of renting annually in the near future, but still receiving a return on investment in the meantime. As a holiday home specialist, our aim is to ensure that the property achieves 20-30% above the annual rent price of the property for short-term lets net of the fees. Clients looking to rent short term in luxury villas are willing to pay high!
Popular areas for short-term lettings
Different communities in Dubai are popular for short-term lets for different guests. Dubai Marina, Bluewaters, Jumeirah Beach Residence and Palm Jumeirah are firm favourites for leisure guests with Downtown, Business Bay and DIFC are most popular with corporate guests who are visiting on business. Demand is certainly increasing in villa communities that are away from crowded areas of the city such as Emirates Living, Victory Heights, Jumeirah Golf Estates and Al Barari as guests are looking to stay more private when they visit Dubai and would prefer to be secluded.