A recent market study reveals that investors pursuing residential assets in Dubai often prefer studios, along with one and 2-bedroom apartments. The average payback period for investments in Dubai’s apartment market stands at around eight years, buoyed by stable tenant occupancy and an annual rental yield of 7-8%. Remarkably, when factoring in property appreciation over this span, the time to recoup investment can significantly shorten. If you’re considering investing, now is a great time to buy property in UAE!
“Typically, rental yields in Dubai average between 5-7%, with high-demand properties even reaching annual returns of up to 11%,” states Tahera Zaman, International Investment Consultant for New Build and Off-Plan at Victorstone. She adds, “With property values increasing year-on-year—estimated to have risen by 14-15% from mid-2022 to mid-2023—the payback period is projected to decrease.”
In one notable case, we identified a studio in Al Furjan, an area renowned for its strong demand for rental apartments, and assisted our investor in acquiring it for $122,110. Just one month after finalizing the deal, we successfully leased the apartment for $1,259 per month, resulting in a commendable 10.7% annual return.
British, Indian, and Chinese buyers are leading the charge among international investors in Dubai.
Popular Residential Unit Types
For investors looking to acquire residential properties in Dubai, studios, one-bedroom, and two-bedroom apartments are the preferred options. When searching for rental apartments, potential tenants prioritize utilities (47.6%) as their primary concern, followed closely by convenient locations (42.8%), 24/7 complimentary services (4.7%), and community events (4.7%).
Investors targeting real estate aim for a reliable income stream akin to earning dividends through stock or fund investments. “Investors regard their Dubai real estate as a long-term asset, protecting their capital from economic and political uncertainties in their home countries,” explained Tahera. The success of real estate investments depends on various factors, including the current market conditions (prices and property liquidity), the type of housing, location, and the property management company overseeing the rental process.
Identifying the Ideal Neighborhood for Property Investment
When exploring the best neighborhoods for real estate investment in Dubai, it’s crucial to look beyond general areas and focus on specific towers within those districts.
“In even the most desirable locations, we’ve identified certain towers that present challenges, such as mold issues in apartments due to inadequate ventilation, frequent elevator malfunctions, and underdeveloped infrastructure,” explained Tahera. Many investors are unaware of the complexities tied to each tower.
Conversely, she pointed out that hidden gems can often be found in less conventional areas. “These may include apartments priced below market rates, where owners are motivated to sell quickly for personal reasons or have already seen significant appreciation in the property’s value and choose to cash in, even as prices continue to rise.”
Another opportunity arises with “cancel” offers, where a buyer withdraws from a deal, allowing the right to purchase their apartment to be transferred to a new buyer.
“Among our rental clientele, the most sought-after areas include Dubai Hills, The Greens, Creek, and JLT,” added Tahera.
Off-plan vs. Resale: Making the Right Choice
Choosing between off-plan and resale properties depends on the homeowner’s goals, budget, and market conditions. Many investors prefer off-plan properties for potential resale, but this doesn’t guarantee success due to possible value declines during construction and inflated initial prices.
Tahera highlights that resale properties are often favored by investors looking for quick rental income, as they typically cost less. Recent market data shows significant price increases for primary and secondary properties in areas like Dubai Marina and Dubai Hills. Ultimately, she advises focusing on the specific property rather than just the neighborhood when making a decision.
What is the Price of Real Estate in Dubai?
The average cost of a studio in Dubai is approximately $260,000, with rental prices increasing by 8-10% since early 2023. Short-term rentals surged by 30% due to seasonal demand, while long-term rentals rose by 27-30%. This growth trend is anticipated to continue as Dubai aims to double its economy by 2033, attracting more global companies and skilled professionals.
