As an investor, if you're looking for high returns by investing in Dubai's real estate, then think about investing in new communities which are slightly more economical as well.
Property Finder's latest data revealed that new communities such as Meydan and Damac Hills offer gross rental yields of 9.3 per cent and 8.9 per cent, respectively. While Dubai Silicon Oasis apartments provided the highest gross rental returns in Dubai at 9.5 per cent in H1 2019 compared to 9.2 per cent a year ago. The study also revealed that average rental returns in Dubai are better than big cities despite decline in prices and sales over the last few years.
The average rental yield in global property hotspots such as London stands at 2.7 per cent, Hong Kong at 2.4 per cent, New York at 2.9 per cent and Singapore 2.5 per cent hover in the low single digits while Dubai properties consistently offer over 7 per cent gross returns on average.
"Despite a sustained contraction in prices, Dubai still holds its own as an investment hotspot with attractive yields and new legislative initiatives to further entice investors and companies," said Lynnette Abad, director of data and research at Property Finder.
Rental yields are the rental income (the money a tenant pays to the landlord) divided by the purchase price of the property. It is one of the most important considerations for mid to long-term investors. Landlords get higher rental yields from apartments than villas and make more profit by renting studios than large apartments.
Sudhakar Rao, chairman of Gemini Group, said with ongoing increase in supply of real estate projects in Dubai, rental yields and prices have bottomed in recent past. "This is true for both new and old developments. This augurs well for the consumer and end-user market. It also brings quality of end product to the fore and brings more competition. Developers are coping with this new normal by offering sweeter deals and to remain in the race. This trend is likely to continue until 2020," said Rao.
Alan James Gammon, general manager of Samana Group of companies, said that rental yields across Dubai are down in comparison to a year ago that said interest in property in the heart of the city is seeing keen interest as the prices have fallen and new products have come on line.
"It is a tenants market with plenty of choice in all price brackets and location. We have seen a lot of interest in newer properties as tenants see it as an upgrade and often a perceived better location for often less than they were paying a year ago. It is also supporting entry level opportunities to the sales market with tenants taking the first step on the property ladder as first time buyers," he said.
Property Finder revealed that investors' favourite areas such as International City (8.4 per cent), Dubai Sports City (8.4 per cent), International Media Production City and Arjan (both at 7.6 per cent) also continue to offer compelling returns for buyers.