Dubai’s real estate market continues to thrive, attracting investors with its high rental yields, surpassing 10% in some areas.
The city has seen a rapid increase in property prices, growing by over 20% annually in 2023, making it the second-fastest growing real estate market in the world. On the contrast, the global average for property price growth is stuck at a near-decade low of 3-4%.
Despite this surge, experts believe that the market is not overheating, as prices are still 25% below their 2014 peak. While in 2022 Russians were the top buyers, in 2023 UAE is seeing more Europeans and Chinese, as well as Indians and Brits interested in purchasing property for tax and safety reasons.
UBS’s Global Real Estate Bubble Index ranks Dubai as one of the safest markets. The city’s strong economic growth and the influx of wealthy migrants contribute to its sustained double-digit growth. Dubai is predicted to attract 4,500 millionaires this year, and the issuance of 3.4 million new residence permits in the past 12 months highlights its appeal.
Demand and investment activity in Dubai are robust, with over a billion US dollars worth of real estate transactions occurring in a single day in June 2023, according to a leading online property hub Housearch.com.
While in 2022 buyers were heavily interested in beachfront property in Dubai, investors now are shifting their focus from luxury properties to smaller, more affordable homes in less expensive neighborhoods to the South and South-East of the city center. These areas, now rebounding in property values, stand at about half of their 2014 levels, according to Housearch.com.
This shift is supported by data from CBRE Group, a major real estate investment firm. Neighborhoods like Remraam, Liwan, Discovery Gardens and Dubai Investment Park are gaining attention due to their impressive gross rental yields of 9-10%. Combined with anticipated property value appreciation, investing in buy-to-rent residential properties in these areas can potentially result in an annualized return on capital of around 20%. In contrast, prime locations like Palm Jumeirah offer lower rental yields of 5-6% and are considered more susceptible to market cycles.
While luxury properties in iconic locations remain desirable, from the perspective of buy-to-rent investors, the less glamorous areas of Dubai are proving to be the real winners, say Housearch.com experts. With strong rental yields and the expectation of property value appreciation, these neighborhoods are emerging as the new frontiers in Dubai’s real estate market.