Wednesday, Jul 27, 2016
Dubai: Investors searching for the best yields in Dubai realty need not look beyond Discovery Gardens, International City and Silicon Oasis. The three mid-market clusters currently generate yields of 10.2 per cent, 9.4 per cent and 7.9 per cent, respectively, according to an update from the consultancy Chestertons Mena.
It reinforces the message that in times of general market softness, mid-market is what offers the most comfort for investors who have rented out the properties.
In comparison, the average yield on apartments across freehold locations in Dubai is at around the 7.5 per cent mark, while for villas it is now 4.8 per cent.
“Apartments tend to provide a higher average yield than villas — especially those in the more affordable developments. This bodes well for developers of any upcoming projects in Dubai fitting this category, as they will surely attract investors, no doubt pleasing tenants on modest incomes,” said Declan McNaughton, Managing Director UAE, Chestertons Mena.
And the smaller the unit, the better the yield. Chestertons’ reckons studios would fetch the owner in the range of 8.5 per cent, and outperforming “larger apartments by almost 2 per cent, while more than doubling the yield generated by a five-bedroom villa over the same period”. “The resilient performance in apartment yields was all the more impressive given rental rates during the second quarter were down on average 0.95 per cent while sales prices were up 0.7 per cent on average squeezing margins,” the report adds.
As for transactional activity during the current quarter, the consultancy does not paint an upbeat picture. “In the absence of any major catalyst, the market will remain slow during the third quarter and rental demand will continue to be weak,” said McNaughton.
This would follow a second quarter where transactions were down 6 per cent at Dh26 billion. But compared with the previous quarter, sales transactions were up 17.5 per cent.
Factbox: Villa market remains under pressure
An uncertain job situation and still weak demand remains a drag on Dubai’s high-end villa-centric communities.
According to the Chestertons Mena market update, rents in Jumeirah Islands and Jumeirah Golf Estates “fell on average by 5 per cent in the second quarter compared with the previous quarter. A three-bedroom villa in Al Furjan currently rents for Dh175,000, compared with Dh203,000 in Arabian Ranches and Dh360,000 per annum on Palm Jumeirah.”
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