Should you buy-to-rent-out an apartment in the UAE?

Real estate in Dubai, UAE, has great investment value. It’s one of the most developed and technologically advanced cities on the planet. It’s a real miracle in the middle of the desert with a thriving economy, business and a strong real estate sector. Entrepreneurs all over the world seek opportunities in this region. This article will look at why it’s profitable to invest in the Dubai property market, what income options there are and how much they can bring you.

Content:

• What to invest in to get a stable rental income
• Rental income from housing units in the UAE
• Long-term rentals
• Short-term rentals
• Weekend or holiday rentals
• Dubai’s most profitable property to rent out
• Conclusion
• Help from our specialists

What to invest in to get a stable rental income

The main option to make real estate work for you and bring in profits is by renting. You can buy a villa or an apartment in Dubai and rent it out.

The rental yield from real estate in Dubai varies depending on the type of property. According to the analytical data for spring 2023, the average gross rental yield for residential properties in the emirate remained stable in March, with a slight increase of only 0.05% to 6.69% compared to the previous month. The yield for apartments and townhouses increased slightly by 0.09% and 0.07%, reaching 7.11% and 6.38% respectively. However, the yield for villas continued to decline, reaching the lowest level in 8 months, decreasing by 0.11% to 4.77%.

The decrease in villa yields can be explained by various factors, including the persistent gap between supply and demand in the buying and selling market, high rental rates in many residential communities, which seem to have peaked, and a weakening demand.

According to experts, areas located near beaches and waterfronts are of particular interest to buyers, investors, and tenants. These areas experience a stable influx of foreigners, making the return on investment in residential real estate for rent in Dubai more noticeable.

Rental income from housing units in the UAE

Rental income varies from 3 to 13% a year, depending on the property type and its location.

There are 3 main points when renting a housing unit:

1. Most rental agreements last for at least 1 year.
2. Rent payments are usually made through bank cheques according to a schedule, typically every 3–4 months. In rare cases, you can pay once a month or week (this is common in aparthotels).
3. To evict a tenant, it is necessary to send them a notice one year before the rental period expires.

The rent type also affects the profit amount. In the UAE, there are 3 ways to get a stable annual rental income on the market:

• Long-term rentals;
• Short-term rentals;
• Weekend or holiday rentals.

Let’s look at this in more detail.

Long-term rentals

This is a form of rental where the agreement is concluded for several years in advance. The average yield for apartments in the UAE rented out on a long-term basis is 5–8% per year, with the maximum reaching 9.8% or more annually. In the UAE and Dubai, it is common to seek assistance from a property management company. If the owner wants to earn income but doesn’t want to rent out villas or apartments themself, the management company will see to everything from looking for a tenant, moving them in, and checking and maintaining the property. A major advantage is that the owner doesn’t have to pay any fees since this is the renter’s responsibility (usually it doesn’t exceed 5% of the rent).

Documents required from the owner:

• Passport;
• Title deed.

Short-term rentals

This is the most attractive option for investors looking to maximise their profit. The yield from short-term rentals of apartments and villas is 11–13% annually.

What should you do? First, the owner must get a relevant licence for 12 months. The second step is to sign an agreement with a management company.

The agreement is signed for several months to 1 year. The maximum fee for property management is 20% of the rental amount.

Weekend or holiday rentals

This is another option for those who buy real estate to rent it out in Dubai. It involves renting out housing for an extremely short period like 1 day or a short holiday. Over the past few years, it’s become very popular, partly due to its high profitability.

The peak demand for such properties occurs during the tourist season or in anticipation of a major event.

Advantages:

• More tenants pass through the property;
• The agreement can be signed for one-time or extended use;
• Higher

Disadvantages:

• More maintenance expenses;
• Seasonal nature.

Dubai’s most profitable property to rent out

To understand the overall situation in the rental market, we suggest familiarising yourself with the districts that are experiencing the highest growth in monthly rental rates as of May 2023.

The highest rental price growth for apartments and villas in Dubai is observed in historically popular high-end residential communities. Below is a table of Dubai districts where the highest rental yields were recorded (depending on the type of property) in H1 2023.

Conclusion

Today, apartments in Dubai remain a liquid and most profitable option for real estate investments. Based on data provided by local analytical agencies, it can be concluded that the highest income is in the apartment sector. Despite the increasing popularity of spacious housing, rental income from villas still noticeably lags behind the revenue generated from apartment rentals.

Help from our specialists

You can buy an apartment in Dubai in any area you’re interested in via the Emirates.Estate website. Our specialists have up-to-date information on UAE real estate trends as well as many years of experience in closing sales deals. For a detailed consultation, leave your request on the site.