Rental yields in Dubai escalate as demand surges
The demand for housing and commercial units in Dubai is extremely high
and their scarcity is driving the price and rental index upwards. As
Dubai’s population grows, mostly due to the expatriate inflow generated
by the booming UAE economy, housing requirements are on the rise. Our
estimates show that some 27,000 potential residents and workers enter
Dubai every month.
Currently,
Dubai is promoting high-end housing projects that are mainly part of
huge mixed-use developments. Although by the end of 2008 when scores of
projects will be completed, demand would still exceed supply. The
shortage will be much severe in the low- and medium-cost segments where
projects like International City are scarce. This is bound to drive
rents in the afore-mentioned categories higher.
As new residents flock to Dubai, investing in property rentals is
certainly a guaranteed return on investment in the emirate.
Rental growth in Dubai
From
our calculations, we surmise that rental yields for property in Dubai
ranges from 7 to 10% with residential returns at the lower end and
retail yields at the higher end. They are among the highest in the
world, much higher than the UK and the USA.
Rental yields in other countries:
Our
analyses of leased-out apartments at prime city locations in Dubai
reveal that rental yields for one-bedroom apartments range between
US$15,000 and US$40,000 while those for two-bedroom units go from
US$40,000 to US$50,000. Currently vacancy levels in Dubai are virtually
zero. In the light of increasing demand and poor supply, these figures
will certainly go up.
|
|
|
| Dubai Marina |
22.5
|
| |
| International city |
10.2
|
| |
| Jumeriah Lake towers |
21.1
|
| |
| Greens |
21.1
|
| |
| |
|
| All amounts are in US$100K. |
|
|
|
|
| Dubai Marina |
|
| |
| Springs |
34,059
|
| |
| Jumeriah Lake Towers |
26,430
|
| |
| International city |
15,531
|
| |
| Old Town |
37,227
|
| |
| Greens |
31,108
|
| |
| |
|
|
|
 |
| Dubai Marina |
39,358
|
| |
| Jumeriah Lakes Tower |
40,644
|
| |
| Old Town |
49,046
|
| |
| Greens |
43,596
|
| |
| Springs |
49,727
|
| |
| Arabian Ranches |
40,417
|
| |
| |
|
|
(*Compiled by Gowealthy Research Team. Sources include newspaper classifieds for rentals in Dubai, online property adverts and listings on Gowealthy.com)
Scarcity
of space – both residential and commercial – in Dubai could be
attributed to increasing population, construction delays and dwindling
labor supply. Consequently in the light of these factors, we understand
that the Dubai Government’s declaration of 5% rental cap for 2008 will
have minimal effect on escalating prices and rents. In addition, there
has been of late, a significant drop in the number of new projects
being launched in Dubai.
Therefore, a steep hike in rents and prices in Dubai in 2008 is
imminent, which would very well be sustained until 2010/2012. Taking
into account the recent spurt in prices and rents, we expect the rental
yields to be far higher in 2008 than the current rates.
Rental contracts in Dubai awaited
Real
Estate Regulatory Authority (RERA) in Dubai is expected to introduce
rental contracts between landlords and tenants to reduce rent inflation
in the emirate. The purpose of the contracts will be to reinforce a
sense of confidence between landlords and tenants - and they will last
for between three and five years.
The relatively high rental yields have unleashed investor frenzy in
Dubai with new properties being sold as soon as they enter the market.
Monthly Land Sales in Dubai ( Feb 2008 )
|
Area
|
Land Count
|
Worth
|
|
Mirdif
|
18
|
158,133,010
|
|
Naif
|
4
|
77,265,000
|
|
Al Bada
|
4
|
14,250,000
|
|
Al Ras
|
1
|
5,371,291
|
|
Al Mararr
|
4
|
107,100,000
|
|
Al Wasl
|
2
|
15,500,000
|
|
Lehbab
|
1
|
47,598,000
|
|
Mankhool
|
1
|
16,000,000
|
|
Al Jadaf
|
14
|
256,222,092
|
|
Al Ruwayyah
|
28
|
212,280,576
|
|
Al Mamzer
|
1
|
10,300,000
|
|
Abu Hail
|
3
|
7,760,000
|
|
Al Baraha
|
1
|
28,000,000
|
|
Al Hamriya
|
1
|
350,000,000
|
|
Al Raffa
|
1
|
5,100,000
|
|
Al Dhagaya
|
3
|
23,500,000
|
|
Al Karama
|
1
|
75,000,000
|
|
Ranches
|
18
|
57,514,256
|
|
Al Muteena
|
4
|
12,850,000
|
|
Al Manara
|
2
|
25,000,000
|
|
Al Waheda
|
4
|
9,100,000
|
|
Jabal Ali
|
2
|
12,856,120
|
|
Al Rashidiya
|
2
|
4,500,000
|
|
Al Murqabat
|
1
|
23,207,536
|
|
Um Al Sheif
|
1
|
7,500,000
|
|
Port Saeed
|
1
|
1,600,000
|
|
Marsa Dubai
|
1
|
220,000,000
|
|
Nad Al Hamar
|
4
|
17,350,000
|
|
Nad Al Shiba
|
7
|
156,068,686
|
|
Eyal Nasser
|
3
|
32,350,000
|
|
Hor Al Anz
|
12
|
38,306,800
|
|
World Islands
|
1
|
175,000,000
|
|
Palm Jumeirah
|
114
|
613,890,400
|
|
Al Goze First
|
5
|
9,568,583
|
|
Wadi Al Amardi
|
1
|
18,000,000
|
|
Al Warsan First
|
24
|
341,016,800
|
|
Al Saffa Second
|
2
|
14,334,300
|
|
|
Area
|
Land Count
|
Worth
|
|
Al Twar First
|
1
|
141,688
|
|
Al Qusais First
|
1
|
22,450,000
|
|
Al Mezhar First
|
3
|
13,050,000
|
|
Jumeirah Third
|
2
|
28,600,000
|
|
Al Barsha First
|
5
|
106,498,670
|
|
Al Safouh Second
|
2
|
750,000,000
|
|
Al Twar Third
|
2
|
6,977,215
|
|
Al Qusais Third
|
1
|
1,900,000
|
|
Al Qusais Second
|
1
|
3,229,380
|
|
Al Mezhar Second
|
2
|
6,660,000
|
|
Al Nahda Second
|
7
|
233,985,000
|
|
Al Warqa First
|
12
|
125,860,280
|
|
Um Suqaim First
|
4
|
29,500,000
|
|
Muhaisanah Third
|
2
|
7,050,000
|
|
Al Barsha Third
|
4
|
22,552,000
|
|
Al Barsha Second
|
1
|
5,550,000
|
|
Al Khawaneej First
|
3
|
20,319,190
|
|
Al Warqa Third
|
3
|
11,460,000
|
|
Al Warqa Second
|
1
|
3,399,950
|
|
Um Suqaim Third
|
2
|
17,880,000
|
|
Um Suqaim Second
|
1
|
10,000,000
|
|
Sheikh Zayed Road
|
5
|
368,313,000
|
|
Al Khawaneej Third
|
87
|
1,573,336,800
|
|
Sport City
|
3
|
55,613,000
|
|
Jabal Ali Industrial
|
18
|
485,443,050
|
|
Al Barshaa South First
|
1
|
1,200,000
|
|
Al Barshaa South Third
|
1
|
15,120,000
|
|
Emirates Hills First
|
22
|
525,040,000
|
|
Trade Center First
|
1
|
250,000,000
|
|
Emirates Hills Third
|
10
|
34,173,508
|
|
Emirates Hills Second
|
2
|
43,183,951
|
|
Al Qusais Industrial Third
|
1
|
27,231,000
|
|
Al Qusais Industrial Fourth
|
4
|
107,123,000
|
|
(Source : Dubai Land Department )
|
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