The best places to rent and purchase a home in the UAE

Purchasing real estate for investment purposes is a popular practice in the UAE. Especially, since this is a country where all the necessary conditions are created to provide business profitability for investors who are purchasing or renting out housing. Following this then, we will talk about where in the United Arab Emirates it is more profitable to purchase real estate and in which places the demand for rent is higher.

Real estate market projections for the UAE during 2021

The coronavirus pandemic has certainly affected the housing market as it has resulted in supply and demand inequalities. Subsequently, this had a negative impact on sales and rental prices with landlords have had to contend with low rents and lower returns. Despite this though, some areas in the UAE have managed to reverse this trend.

According to a study by real estate consulting firm Savills in 2020, Dubai still offers investors attractive deals as it has one of the highest rental profitabilities in the world. This can be seen in the emirate's gross domestic income for luxury property investors that remained the fourth-highest in the world at 4.6%, which is ahead of Los Angeles, Moscow, and Cape Town.

According to Lewis Allsopp, the executive director of a large real estate broker Allsopp & Allsopp, when prices are attractive and rents are gradually increasing, that is the most favorable time to enter the market. At the moment, the cost of entering the Dubai real estate market is the lowest it has ever been. Furthermore, according to preliminary forecasts, there is expected to be a sharp increase in sale and rent prices in the next few years.

What are the risks

Haider Tuaima, head of real estate research at the consulting company ValuStrat says that investors should bear in mind that the real estate market is still quite unstable and unpredictable. So it is necessary to be extra careful and cautious when weighing the potential risk(s) are involved. Especially when it comes to the value of one’s assets and potentially losing them.

In addition, he also goes on to say that since real estate values can increase due to strong market growth, stabilize, or even decline at certain stages of the cycle, investors need to recognize what phase the market is in and then from there make a deal at the right time and right price.

Moreover, during the fall of the real estate market, you should be especially careful and take into account all the factors that can negatively affect your profitability. For instance, if rental income is your only source of income, it is likely that during an unfavorable period, you risk being left without the ability to pay your mortgage payments.

Furthermore, risks usually become serious when real estate investments are designed for a short duration of time. However, it should be noted that even though the UAE's real estate phase is on the verge of a slump, the value of long-term real estate investments rarely declines during this phase.

So if now is the right time to invest, where do experts think landlords are most likely to achieve the best rental returns?

Abu Dhabi

Al Ghadeer District

According to Crompton Partners, a large real estate company in the Emirate, Aldar's project Al Ghadeer, which is located on the border of Dubai and Abu Dhabi, offers the highest rental income in the UAE with an expected income of 8%.

In addition, Crompton Partners has also reported that the rent for a one-room apartment in this area starts from 22,000 AED and can go up to 43,000 AED for a two-room apartment. Furthermore, it was also reported that in 2020, sales prices fell by about 8%.

Al Reef District

Al Reef is located on the outskirts of the city and offers the second-highest rental income at 7.5%.

According to Crompton Partners, the rent for a one-bedroom apartment in this area starts from 48,000 AED, while the rent for a three-bedroom apartment starts from 90,000 AED. In addition, while the rent for villas in this area varies, one can expect the price to be anywhere from between 80,000 to 165,000 AED.

Furthermore, the real estate company has reported a growth of 4% for the Al Reef District, which it directly attributes to gaining increased popularity in the last year due to the pandemic spurring on more residents to move into more spacious housing.

Al Reem Island

Al Rim Island has the third-highest rental income in Abu Dhabi at an average of 6.8%. This can be seen in the rent price for a one-bedroom apartment, which is estimated to start from between 50,000 to 70,000 AED. Also, a luxury four-bedroom apartment has an annual expected rent of about 240,000 AED.

Al Raha Beach and YAS Island

Al Raha Beach and Yas Island round out the top five places to rent in Abu Dhabi with rental income of 6.2% and 6%, respectively.

According to Crompton Partners, Al Raha Beach, an Aldar beachfront Development, recorded a 6% drop in total sales prices last year. In addition, Yas Island’s apartment prices fell by 6% while its villa prices increased by 12%.

Also, at Al Raha Beach, landlords can rent out a one-bedroom apartment from 65,000 AED or a luxury four-bedroom apartment for 260,000 AED. Also, a four-bedroom townhouse can be rented for between 190,000 and 310,000 AED.

Moreover, on Yas Island, the rent for a one-bedroom apartment starts at 70,000 AED, while a three-bedroom apartment can bring in rent of around 190,000 AED. A two-bedroom villa in the community can be rented for 160,000 ADE, a five-bedroom villa costs between 240,000 and 300,000 AED.

Furthermore, according to Ben Crompton, managing partner at Crompton Partners, purchasing a property for rent now has never offered better value, despite interest rates being at an all-time low. He also goes on to say that investors need to be aware of what these low-interest rates mean. And mainly, what this means according to him is that investors can purchase a good property at an affordable price and then make a quick return on it.

Dubai

Discovery Gardens Residential Complex

Discovery Gardens offers investors the highest gross rental profitability in Dubai. This is endorsed by the real estate website Property Finder, which has reported that apartments in this area generally generate a profit of more than 8% per annum.

Furthermore, the average price for renting a two-bedroom apartment in this area is 38,000 AED. While the average retail price for a house is 417,000 AED.

International City District

Generally, when renting out apartments in International City, one can look forward to generating an expected income of more than 8% per annum. What’s more, the average price for renting out a two-bedroom apartment is 25,000 AED, while the average selling price for selling an apartment is 300,000 AED. According to Property Finder, rent has also increased by 6 % in the last six months in this area.

Dubai Marina Area

Apartments in Dubai Marina are the third most area in Dubai. Especially, since landlords who rent out housing here make an annual profit of 6%. In addition, an apartment in Dubai Marina can be rented for 60,000 AED and purchased for 830,000 AED. Furthermore, the rental housing price in Dubai Marina remained stable for the past 6 months.

Damac Hills Community of Villas and Townhouses

The Damac Hills community offers one an expected income of more than 6% per annum, while the expected return on real estate on UNA by Nshama is more than 5% per annum.

2021 is the year of opportunities for investors

If you have been making plans to purchase a property in Dubai and have been putting it off, it’s high time you start doing something about it. Now is the right time to make a purchase and invest!. Especially, since compared to other world markets, there are much more attractive and profitable offers available here. Now you can purchase real estate at an affordable price and rent it out with the guarantee of a decent return. Although, you should know that this offer is for a limited time only as prices in prestigious areas have already begun to increase.

And while the return on investment in real estate in the short term is unlikely to be significant, one can still benefit from investing in long-term rental housing. Furthermore, it has also been reported that real estate prices are rising due to the rent prices increasing. As a result, this will in turn lead to a capital and profitability increase as well.

This is also why experienced investors have advised people to rent out property in Dubai’s city center since the average rental income is between 4 and 5%. In addition to this, they go on to advise that Jumeirah Beach Residence and Palm Jumeirah are the main areas in Dubai where real estate is purchased. In fact, these areas are particularly popular amongst tourists.

So investors who are planning to invest money in real estate with the obvious intent of making a profit from it by renting it out should still consider renting out property for both the short and long term. This way, the former option will still allow you to receive some additional income from renting property to residents or even corporate clients who are not interested in any long-term obligations. In addition to this, you will also be able to make a good profit from the tourists vacationing in the UAE during the holiday season. So as you can see, short-term property rental in Dubai can be just as beneficial and rewarding as long-term property rental. Especially since you can expect to receive between20%-30% more income when renting out your property for the short term in Dubai.

Moreover, short-term property rental allows the landlord to be more flexible in making decisions. Especially when it comes to using the property more efficiently and always making sure that things are kept up-to-date. Also, since the property is yours to do with as you like, you don’t simply have to rent it out. You can choose to live in it yourself or dispose of it as you see fit. You can even choose to sell it off in the future if you like. Whatever you decide, the decision is entirely up to you since you are the sole owner of the property.