Do you expect high returns on buying an apartment in Dubai?

15 / 07 / 2020

What profitability should an investor expect from buying residential property in Dubai?

Considering current real estate prices, the yield from the purchase of housing in Dubai is 6%, but the yield from the purchase of villas is 4.7% per annum.

It is worth noting that the cost of buying real estate is declining more rapidly than the rental price of this property, and this applies to almost all areas of Dubai. For example, in the 2nd quarter of this year, housing prices fell by 11%, but the average rental price fell by only 10%.

Based on these indicators, you can see the market trend in action. When housing prices decline more rapidly than rental prices, there is an increase in rental yields.

Since 75% of working expats earn less than 10 thousand dirhams ($ 2,725) per month, the demand for affordable housing is growing rapidly every year. For example, in the commercial real estate sector there is no such rapid growth. Expats need low rent apartments because they don’t have enough money to buy their own apartment.

If we consider the areas with affordable housing: the Discovery Gardens, International City or Dubai Production City, then the real estate rental cycle is very fast, and investors may not worry about the profitability or return on their real estate.

To clearly show how much profit you can have from investing in affordable real estate in Dubai, let’s take the International City area. In June 2020, the yield was 8.2%, and a year earlier it was only 7.5%. You must admit that an increase in profitability of 0.7% in just a year and during the crisis is an excellent result.

And this despite the fact that the cost of housing in the "International City" over the past year decreased by 14%, and in annual terms - by almost 5%.

The growth of profitability in the sector of real estate accessible even to a small investor does not mean at all that there is no growth of profitability in the premium sectors. Let’s take the same time period of 1 year and look at the dynamics of changes in returns on real estate in elite areas:

    ● The Lakes area increased from 5.8% to 6.8%;

    ● The Jumeirah Village area increased from 5.4% to 6.3%;

    ● The Greens area increased from 5.8% to 7.6%.

As for the rental prices of this property, they on average remained at the same level.

The upscale real estate sector can offer relatively high returns on investment. For example, “The Palm Jumeirah” - 6%, such a return is much more attractive in comparison with real estate in Paris, New York or London.