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Rising rentals in Dubai: Speculators and holiday home owners opting for long-term rentals of their properties – News


An artist’s impression of the Samana Retail Park, a Dh150 million retail zone to be built in Arjan. — Photo supplied

Published: Sunday, April 14, 2024, 5:34 p.m.

Last update: Sunday, April 14, 2024, 5:42 p.m.

Speculators and holiday home owners who used their properties in Dubai only a couple of times a year are increasingly opting to rent them out year-round to benefit from rising rental yields.

“With the increase in rents, long-term speculators or vacation home owners who come to Dubai twice a year to visit their vacation home are forced to reconsider because the same property that previously had a profitability of 150,000 dirhams, today it is 450,000 dirhams. . That’s why they are encouraged to rent their units as well. The occupancy of 45 days (15 days during Christmas and 30 days in summer) has improved to 365 days because one resident is now living there,” said Imran Farooq, CEO of Samana Developers.

In an interview with Khaleej TimesHe said it is very easy to achieve an eight percent yield on rentals and if investors put their units on online platforms like Airbnb, they can earn double-digit income.

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Rents in Dubai have grown at a double-digit rate over the past three years and this trend is expected to continue in some parts of the emirate. However, most areas could see a moderation in rental growth in 2024 and 2025.

He added that demand for Dubai as a city for tourism and living is growing substantially, driving up property and rental prices. “Due to rising rents, the motivation for keeping an apartment part-time has shifted to renting an apartment full-time. Even long-term speculators who wanted to keep the apartment empty now have great pressure to make the most of this property by renting it out,” he added.

The emirate’s real estate market is benefiting from geopolitical tensions around the world due to its security aspects.

“After Expo 2020, the business boom is helping Dubai and more people are successful in business after Expo than before Expo. The “feel good” factor among the business community is at an all-time high. Then there is a big boom in India and Bangladesh and people are doing very well financially. So the first thing they want to do is move their family for education to a safer place. But visas for Western universities are a challenge, so Dubai is the biggest beneficiary.”

Minor fix, if it happens.

He added that the real estate market scenario and fundamentals are completely different now compared to 2008 as both investors are market players and are now more mature.

“Dubai’s real estate market is very mature because buyers have taken into account paying in full, whether it is off-plan or ready-made properties. Furthermore, in case of any global crisis, the impact will not be as strong as previous crises. In 2008 there were no Escrow accounts. Today, banks are flooded with hundreds of billions of dirhams of money in escrow. If there is a small correction on a global scale, I see a small correction in the local real estate market and it will resume again. Furthermore, I do not see a slowdown in construction by the vast majority of developers.”

Imran Farooq, CEO of Samaná

Imran Farooq, CEO of Samaná

Farooq added that the Dubai market is currently driven by demand from end users and long-term investors, so investment is minimal.

50% capital appreciation

Farooq revealed that investors who invest in an off-plan unit at the initial stage of the project can still enjoy around 50 per cent capital appreciation till project delivery, although the market is expected to slow down after three strong years. . post-pandemic demonstration.

“Investors can enjoy capital appreciation of around 50 per cent from the purchase of an off-plan property to its delivery. With the current level of demand, this trend will continue.”

In the past six months, the CEO of Samana Developers said there was a huge demand for commercial office space. “And that’s where investors are stepping up and change is happening because, on average, the value of grade A commercial office space has appreciated 80 percent in the last 15 to 18 months. Rents have also increased from Dh100 per square foot to Dh225 per square foot in the same period. Land prices for villas, townhouses and commercial properties have seen a huge increase. Commercial land for construction in the last 24 months appreciated on average 300 percent.”

Imran Farooq added that semi-detached houses and villa plots used to cost Dh250 per square foot in 2020, but have increased to Dh2,300 per square foot.

“Townhouses in Al Furjan and JVC have become a rare commodity and prices in these areas have reached between Dh700 and Dh800 per square foot. A JVC plot for a G+4 building in 2020 cost Dh60 per square foot. Nowadays you have to make a lot of effort to buy it at Dh300 per square foot. Arjan’s low-rise buildings used to cost Dh100 per square foot and today they cost Dh300 and are almost impossible to get.”

“People who bought it for 20 million dirhams are now inundated with offers for 60 million dirhams, but the seller still doesn’t go out much because he fears that if he sells it, he won’t be able to buy anything else. This is the same trend in En many other areas there is a similar type of appreciation in Jumeirah Village Circle, Jumeirah Village Triangle, Arjan, Furjan, Marjan, IMPZ and Dubailand is the new area where the asking price has increased by 50 percent in the last six months From 200. at 300 dirhams per square foot,” he added.


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