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Content:
- Rental prices in Dubai in 2022
- Real estate investment in Dubai: how to start earning right away
- Long-term real estate leasing
- Short-term rental in Dubai
- Invest in real estate in Dubai
- Types of rental properties in Dubai
- The cons of buying a home in Dubai
- Land plots in Dubai
- Conclusion
Rental prices in Dubai in 2022
The cost of renting real estate in Dubai from June 2021 to June 2022 increased by an average of 20%.
According to the Dubai Land Department, in the second quarter of 2022, the number of lease agreements rose by 25% compared to the first quarter of the same year.
These districts were in greater demand than others:
- Downtown Dubai
- Dubai Hills Estate
- Dubai Marina.
The most popular rental housing here is among Russians, Indians and the British.
Real estate investment in Dubai: how to start earning right away
In recent years, more and more investors prefer to buy apartments in Dubai and rent it out. To start earning immediately after signing a sales contract, you should choose ready-made, fully furnished residences. You can entrust real estate management, including the search for tenants, to a real estate agency for a fee.
There is no need to worry about protecting the interests of the property owner: all agreements with the future tenant are fixed by an official contract. You can download a model contract on the official website of the emirate’s government.
Long-term real estate leasing
A long-term lease agreement is signed for a year, and if the tenant moves out earlier, he will be obliged to pay a penalty. At the same time, the owner can terminate the contract ahead of time without penalties.
To start renting real estate for a long time, you need a passport of the owner and a document confirming the right to own a home.
You can manage money coming into a bank account in Dubai remotely from another country. Moreover, you can receive money from guests immediately throughout the year or quarterly. The fee can be raised annually by 5–7% of the cost.
Renting out apartments in Dubai, their owners earn an average of 5–10% of the cost of residential properties per year.
Short-term rental in Dubai
It is most profitable to rent out apartments or villas in Dubai for a short time. This allows you to receive income of 11–13% of their value per year.
To rent housing out for a short time, the owner must obtain a special license for one year. It costs $600. You will also need to find a reliable management company that will be responsible for the order and cleanliness in the housing before the tenants move in and after they move out.
As a rule, such companies charge 20% of the total amount paid by the tenant for their services.
Invest in real estate in Dubai
Dubai’s square metre of residential property, according to the local Land Department, averages $3,500 as of early 2023.
Pricing depends on the location of the property. Let’s take a closer look at what parts of Dubai are best suited for real estate investments.
Promising areas in the emirate
According to experts, in 2023, the cost of renting in prestigious and popular areas is set to increase on the back of rising demand. However, prices for apartments and villas will also rise, as they did last year. So, for 12 months since January 2022, real estate in the emirate has risen in price by an average of 20–40%. At the same time, prices rose by 59% in the Palm Jumeirah and by 210% in the Trade Center First.
In 2022, renting a home in Dubai Marina cost an average of AED121,000 per year. This is about 9% less than in the peak 2014. Therefore, the "top" has not yet been reached. This means that it makes sense for investors to invest in housing in this area as rental rates are likely to continue to rise.
Experts believe that in 2023, prices for renting new housing will grow faster than similar prices on the secondary market. The demand for off-plan projects in Dubai is higher than the supply.
Penthouses, apartments and townhouses in coastal areas will also be in great demand among tenants.
According to the latest data, International City, Bur Dubai, Freehold, Dubai Silicon Oasis, Discovery Gardens, Lebanon, Dubai Sports City, IMPZ and Town Square, Deira are the most democratic and low-rent areas.
Property owners in such areas as Sports City, Discovery Gardens and Silicon Oasis have excellent profits. The rental yield is 9% and is one of the best similar figures worldwide.
You can get 7–8% per year for residential property in The Greens and Jumeirah Lakes Towers.
Landlords of housing in the Palm Jumeirah and Dubai Marina have an annual income of 6–8%.
Types of rental properties in Dubai
In 2023, villas and mansions will become more expensive for tenants due to the lack of such properties – in this segment, demand is higher than supply.
Individual houses are less profitable for their owners than apartments, but in this part of the market, the profit for homeowners is significant. So, The Springs and Arabian Ranches villas bring about 6% of their value to landlords every year.
According to experts, in 2023, luxury villas in the Palm Jumeirah and Emirates Hills will cost the most to tenants.
It should be noted that tenants pay all utility bills.
The cons of buying a home in Dubai
There is no doubt that the owners of apartments and houses in the largest city of the UAE benefit: they can have a decent income without much effort. However, before purchasing residential unit, you have to determine all the advantages and disadvantages of buying apartments in off-plan development projects in Dubai or a local secondary property.
So, in addition to the cost of real estate, the buyer needs to pay for representative and agency services. There are some other points that need to consider.
Property maintenance
Homeowners have to pay for its maintenance. The amounts (if any) are set by the Owners' Association or the management company. The amount of payment depends on the class of the residential complex, the costs of cleaning public areas, house security, garbage collection, maintenance of the pool, gym, parking, and so on.
Difficulties in obtaining a mortgage in Dubai
Banks trust and issue mortgage loans to employees of state-owned companies, employees of large enterprises with a good reputation, so representatives of such companies have more chances to get a loan than others.
To get a loan, you need to pay at least 25–30% of the cost of the property.
Land plots in Dubai
In the local land market, experts note an increase in both demand and supply.
In order for the investment to pay off quickly, you need to choose the right area. Plots in places popular with tourists, in territories with developed infrastructure, can bear fruit to their owner faster and in greater numbers.
For example, a square meter of plots in Sports City and Silicon Oasis costs at least AED100, and AED450 in the city centre. In parts of the metropolis with unfinished infrastructure, land prices are more modest. Plots for commercial development are more expensive.
Buying land in the emirate is justified for the following reasons:
- The economy is stable, and the standard of living is high. Land for development is in high demand, and this increases its payback.
- Land prices are low. If you compare them with the cost of land plots in the megacities of the USA and Europe, the comparison will be favourable for Dubai.
- The number of jobs in the city is constantly growing, which stimulates the demand for real estate. Good building plots can be resold profitably.
Conclusion
Is it difficult for you to invest in development projects in Dubai or in ready-to-move housing and not make a profit? If you want to make money on rent and you don't have time to search for tenants, you can always trust the management company that will do everything for you. In this case, you can only receive passive income and watch your property grow in value.
