October 9, 2017
Fabricio Saltini, sales manager at For Est Real Estate on Dubai’s rental yield.
Dubai is known to generate one of the highest real estate yields in the world. The average yield is 6-9 percent annually, which is about 2-3 percent higher compared to the average yield achieved in other international markets. This is especially impressive when compared to mature and established markets such as London, New York, Paris and Sydney. For example, the gross rental yields in Hong Kong, Mumbai, Singapore and London are all lower than 3.5 percent, which makes Dubai an attractive choice for buy-to-rent types of investment. These returns are directly and indirectly affected by different factors. For instance, a recent price correction has helped increase the average yields for property owners. The reason behind it is that buying prices of properties are 20-30 percent lower, while the rental market has seen a proportionally slower drop. This variance helped buy-to-rent investors achieve higher yields percentage year-on-year.
Dubai has also put strict rules and regulations in place to protect the interests of both investors and tenants such as low registration fees and mortgage caps, which helps the emirate to be seen as a maturing market, and as a result, this has garnered investor confidence. Not to mention that buyers can benefit from the “Dubai is the fourth most visited city in the world after London, Paris, and Bangkok, and has the world’s highest visitor per resident ratio” relatively more affordable cost of property in Dubai compared with those in foreign markets. Population growth is also a factor that affects yields rates around the world. Dubai’s population is one of the world’s fastest-growing compared to other major cities, averaging 5-8 percent per year. Dubai’s constant creation of business and investment opportunities creates mass employment opportunities, which invites more and more expats to relocate and live in the city. They come also to enjoy the lavish lifestyle, high paid jobs, tax-free benefits, and of course the nation’s security – all of this increases demand for properties. In a region where tourism was virtually unheard of fifteen years ago, Dubai has built a sector like no other.
Today, Dubai is the fourth most visited city in the world after London, Paris, and Bangkok, and has the world’s highest visitor per resident ratio.
Dubai has millions of tourists visiting the city every year to enjoy the different entertainment facilities, manmade islands, iconic buildings, unique hotels, luxury shopping malls, and the amazing fine dining restaurants. Again, all of this increases the demand for properties. And finally, there is Expo 2020. The event is expected to welcome around thirty million visitors in its six-month duration, driving the city to the top as a business destination. Therefore, demand for all types of property is expected to be even higher. Yield performance is based on many conditions, that include location, type of property – residential, commercial, industrial – buying cost, quality of construction, maintenance costs, rental income and service changes, all of which impact the investment returns over the year.
The variety of investment options available in Dubai ranges from low-end high yielding residential units in areas such as International City, Discovery Gardens, Dubai Silicon Oasis, Dubai Sports City, IMPZ, JVC and Motor City, to more sophisticated investment in premium assets in the residential and commercial markets such as Palm Jumeirah, Downtown, Emirates Living, and Dubai Marina where yields range are lower. Investors are buying different types of properties at record rates, as well as a number of family offices, property funds, and Real Estate Investment Trusts (REITs). They are also looking to expand their asset management portfolio substantially through buying full residential and commercial buildings.
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