Apartments in Dubai attract double-digit annual returns

Apartments tend to provide a higher average yield than villas and especially those in the more affordable developments.
Apartments tend to provide a higher average yield than villas and especially those in the more affordable developments.

Dubai - Landlords continued to benefit from solid rental yields

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By Abdul Basit

Published: Wed 27 Jul 2016, 5:00 PM

Last updated: Wed 27 Jul 2016, 8:34 PM

Apartments in Dubai still attract a double-digit annual returns but villas stand at 6.4 per cent yield, reveals Chestertons MENA.
The property agency on Wednesday released its latest residential market report for Dubai, which recorded little or no movement in sales or rents resulting in a relatively flat performance throughout Dubai in the second quarter of 2016.
However, it did note that landlords continued to benefit from solid rental yields, especially those owning apartments in the more affordable developments of Discovery Gardens (10.2 per cent), International City (9.4 per cent) and Dubai Silicon Oasis (7.9 per cent), while apartments returned 7.5 per cent gross yield across the board on average.
In terms of villa yields, the average across Dubai was 4.8 per cent, but the stand out performers were The Springs (6.4 per cent), Jumeirah Village Triangle (5.9 per cent) closely followed by Victory Heights (5.8 per cent).
"Overall, apartments tend to provide a higher average yield than villas and especially those in the more affordable developments. This bodes well for developers of any upcoming projects in Dubai fitting this category, as they will surely attract investors, no doubt pleasing tenants on modest incomes," said Declan McNaughton managing director UAE, Chestertons MENA.
"With an 8.5 per cent average yield, studio apartments outperformed larger apartments by almost two per cent, while more than doubling the yield generated by a five-bedroom villa over the same period," McNaughton explained.     
The resilient performance in apartment yields was all the more impressive given rental rates during Q2 were down on average 0.95 per cent while sales prices were up 0.7 per cent on average squeezing margins.
Remraam leasing rates declined three per cent during Q2 - a one-bedroom apartment now leases for Dh58,000 per annum. At the top end of the market, a one-bed unit in DIFC rents for an average of Dh115,000 per annum, while a similar property in Dubai Marina rents for Dh80,000 per annum.
On the sales side of the apartment market, a one-bedroom apartment in The Greens now commands Dh1,350 per square foot, while a similar apartment in DIFC and Downtown Dubai costs Dh1,960 and Dh2,218 per square foot respectively.   
It was a similar tale in the villa market. Rental rates in Jumeirah Islands and Jumeirah Golf Estates fell on average by five per cent in Q2 compared with the previous quarter. A three-bedroom villa in Al Furjan currently rents for Dh175,000 per annum, compared with Dh203,000 per annum in Arabian Ranches and Dh360,000 per annum on Palm Jumeirah.
Villa sales prices were relatively stable as well in Q2. A three-bedroom villa in The Lakes sells for Dh1,350 per square foot while a similar property in Jumeirah Golf Estates sells for Dh1,515 per square foot.
Overall, transactions in the second quarter were down just six per cent at Dh26 billion, compared with the previous quarter, however, sales transactions were up 17.5 per cent. After a solid beginning to the year, when mortgage approvals jumped by over 50 per cent, Q2 actually witnessed a 20 per cent fall by comparison.

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