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Dubai Marina and International City are among the top areas to watch for investors who are looking to earn the most on rental homes in the UAE.
Properties in these locations offer the most attractive return on investment (ROI) within the luxury and affordable segments, according to a new report by property portal Bayut.com.
Residential units in Dubai Marina are projected to offer an ROI of 7.04%, the highest rental return for luxury apartments, while flats in International City can generate returns of 9.22%, the highest in the affordable segment.
For budget-friendly villas, Jumeirah Village Circle would be worth looking into, as it has so far generated the most attractive ROI of 6.9% in 2022.
For those looking at buy-to-let villas, DAMAC Hills can be a good option, as properties in the area have offered the “heathiest” rental yields of 6.95%, according to Bayut.
Attractive destination
Buying residential units to let has been a popular option for many investors. The relatively low tax regime in the country, attractive sales prices, strong tenant demand, and high-quality infrastructure and lifestyle, make the UAE an attractive place to invest.
Due to strong demand, leasing rates for apartments and villas have gone up considerably over the past year.
In Dubai Marina alone, asking rents for flats surged by 39%. Tenants in the area now pay an average of AED91,000 ($24,775) a year for a one-bedroom unit, AED140,000 for a two-bedroom flat and AED207,000 for a three-bed home.
Dubai Marina has emerged as one of the most sought-after locations for prospective buyers who are on the lookout for luxury properties.
“Tenants looking for luxury apartments in Dubai have continued to be attracted to the properties in Dubai Marina during 2022,” Bayut said, adding that other popular locations include Downtown Dubai, Arabian Ranches and Dubai Hills Estate.
Budget segment
In Jumeirah Village Circle, which is an attractive destination for tenants in the budget category, rental costs for flats have significantly gone up by 14% to 24% in 2022.
On average, tenants last year had to shell out around AED36,000 for a studio unit, AED51,000 for a one-bedroom flat and AED 73,000 for a two-bed apartment.
In DAMAC Hills 2, rents have gone up by as much as 9% for three and five-bed units, which now cost around AED63,000 and AED98,000, respectively. Four-bed units, on the other hand, “became more affordable” by 5.3%, with annual rents averaging at AED74,000 in 2022, according to Bayut.
However, sales prices have gone up as well. Based on Bayut’s data, sales prices for apartments and villas in the most prominent neighbourhoods of Dubai have increased by 2% to 24% in 2022.
Bayut said the demand for real estate in Dubai has continued to rise, as evidenced by the transaction data released by the Dubai Land Department.
“It has been well documented over the last year that the real estate market has outperformed expectations, with record-breaking transactions, attractive new launches and favourable investment opportunities,” Bayut said.
(Reporting by Cleofe Maceda; editing by Seban Scaria)