Dubai Real Estate: How Profitable is Property Investment?

Dubai Real Estate: How Profitable is Property Investment?

A recent market study highlights that studios, 1-bedroom, and 2-bedroom apartments are favored choices among investors in Dubai’s real estate market. Property prices have witnessed a substantial 14-15 percent increase from mid-2022 to mid-2023.

According to a study on investment trends, investments in Dubai apartments typically yield an annual rental return of 7-8 percent, and it takes around 8 years for the investment to pay off. However, considering property appreciation during this period, the payback period may reduce significantly, as outlined in data compiled by Colife, a UAE-based rental co-living and property management service.

The study emphasized that Dubai’s average rental yield ranges from 5-7 percent, reaching up to 11 percent for properties with high liquidity. With property values rising annually, the payback period is expected to decrease.

As an illustrative example, Colife shared the case of an investor who acquired a studio in Al Furjan for $122,110 in December 2022, yielding a 10.7 percent annual return.

Colife’s study provides valuable insights into the investment potential in Dubai, emphasizing the city’s appeal to international investors. It mentions that Brits, Indians, and Chinese buyers lead the pack of international investors in Dubai, according to consulting company Knight Frank.

The study revealed that, based on customer requests, studios, 1-bedroom, and 2-bedroom apartments are preferred choices for residential investments in Dubai. Prospective tenants prioritize utilities included in rent (47.6 percent), convenient locations (42.8 percent), 24/7 free service (4.7 percent), and community events (4.7 percent).

When choosing a neighborhood for real estate investment in Dubai, the study recommends focusing on specific towers within districts, considering factors like infrastructure, ventilation, and elevator performance. Popular areas among rental clients include Dubai Hills, The Greens, Creek, and JLT.

The study also addressed the off-plan vs. resale dilemma, noting that many investors prefer resale properties for immediate rental income. While off-plan properties may be considered for potential profits, their value can fluctuate during construction or completion.

Average prices for a studio in Dubai hover around $260,000, translating to roughly $3,000 per square meter. The study advises investors to specify a preferred starting price to aim for a high return on investment.

Rental prices have witnessed an 8-10 percent average increase in Dubai since the beginning of 2023, with a significant 30 percent rise in short-term rental prices. The study anticipates continued growth in both property prices and rentals, driven by Dubai’s economic expansion plans and the influx of global companies and skilled professionals to the city.


Publish Date: 16 Nov 2023


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