In Dubai, real estate properties are one of the most sought investments. Despite the slow and gradual single-digit decline across the overall real estate sector and even a 30 percent drop in sales of off-plan projects in Dubai, opportunity for investors still await. Some communities are resilient for recovery and make the most money with their high rental yields.
Latest Dubai rental yield trends
Apartments for sale in Dubai are sound properties to consider buying when using the rental yield concept. But before you purchase a property, you still need to assess your investment.
According to Property Finder Group’s Chief Commercial Officer Lukman Hajje, property rental yields are determined by a number of factors. He said, “Smaller properties produce better rental yields than larger ones. Apartments are better than villas, and studios are better than larger apartments.” He added that newer, emerging communities offer better rental yields than the more established ones.
If you don’t know where to look for high-yielding apartments for rent in Dubai, Property Finder highlighted the communities to better off investing with.
Rental yield for apartments in International City remains the highest at 9.6 percent. This affordable area is most searched for by the working class for renting an apartment in Dubai. Discovery Gardens tie the top spot as well. International Media Production Zone or IMPZ comes second at 8.4 percent rental yield.
The communities such as Dubai Investment Park (8.3 per cent), Dubai Silicon Oasis (8.2 per cent), Dubai Sports City (7.9 per cent), and Jumeirah Village Triangle (7.8 per cent) saw minor decrease in rental yield as the supply continues to exceed the demand.
Areas that are also attracting high volume of tenants at a more economical costs are Jumeirah Lake Towers and Jumeirah Village Circle (7.7 per cent), Greens (7.6 per cent), Motor City (7.5 per cent), and Al Furjan (7.2 per cent).
Despite the rental prices dropping at 13 percent, apartments in Downtown Dubai remain the most expensive for the second consecutive year. Nevertheless, it offers the best returns in the city of up to 5.3 percent. Just like in Downtown, furnished apartments in Business Bay are also in high demand yet relatively lower priced with a chance of good capital appreciation. This fashion center area offers a rental yield of 6 percent.
While the bigger chunk of the incoming property supply in Dubai comes from apartments at 80 per cent, you can still gain a good rental yield on the remaining 20 per cent of villas and townhouses. If you have a stretch of a budget and fancy a long-term rental hotspot for family, there are options like luxury villas in Arabian Ranches, Reem, and Jumeirah Park.
Why is rental yield important?
Rental yield by definition is how much rental income a property produces each year as a percentage of that property’s value. Here’s how to calculate the rental yield:
• Gross Rental Yield is computed when the total annual rent is divided by the property purchase value
• Net Rental Yield is computed when the total rent minus property expenses divided by the property purchase value
• Multiply the result by 100 to get the rental yield percentage
Hence, the rental yield is the most important factor to consider for real estate investors. A real estate broker or agent should guide you to a sound property investment with higher rental yield. The higher the rental yield, the faster you can recover from your property investment, and more profit can be generated after it has been paid off.
The good news is that Dubai ranks among the world’s highest yields. Investors can get an average of 5.8 percent in combined apartment and villas rental yield. This is better than investing in a property in other major cities around the globe such as New York and London with an average of 2.91 percent and 2.1 percent average rental yields, respectively.