Dubai's holiday home demand will have investors thinking of buying again

Dubai has always been a haven for property investors, generating yields that are at least double – and in some cases more than triple – what you might expect to get in other markets.

When you combine that with the fact that the Dubai market is also better priced than its international counterparts – it is the only one among 25 key markets that is currently undervalued according to Swiss investment bank UBS – and that there are no property taxes, it all adds up to a winning proposition. The city’s buy-to-let market, which hit a bit of a slump last year with the onset of the pandemic, has been getting back on its feet.

In fact, Dubai is one of the Top 3 markets in the world that has seen a growth in rentals this year – the short-term market has proven to be especially busy and has been a key driver. Demand in this sector has primarily been fuelled by tourists and by visitors coming for Expo 2020, but also by expats who want a chance to immerse themselves in the city before making a longer commitment.

Cashing In

Communities located a short distance away from Expo such as Jumeirah Golf Estates, Mudon and Town Square are quite highly sought after and are very much of the moment. However, there are also the ‘evergreen’ communities of Dubai, the ones that are always in demand no matter what the occasion – Palm Jumeirah, Dubai Marina and Jumeirah Beach Residence.

Demand in these areas is particularly high over the winter season, and especially close to New Year. Short-term lets are a more attractive option than a hotel stay – they are more cost-effective and families can avoid the hassle of booking multiple rooms. It also provides a good snapshot of life in Dubai for those renters who are testing the waters before opting for signing onto a long-term contract.

Options Open Up

Landlords benefit by generating immediate rental income on their property while still having the flexibility to keep it on the market for sale or a long-term rental. This is an ideal opportunity for investors to expand their Dubai portfolios and to capitalize on the returns provided by short-term rentals.

Right now, holiday-makers and tourists are drawn to short-term rental contracts, as a furnished home gives them complete privacy, extra space, easy access to transportation links and a thriving community where they can interact with others. This also makes an attractive proposition for homeowners who can receive a stable source of income without any hassle.

The short-term market is expected to maintain this pace for the next six to eight months as the post-Expo buzz remains in the air. According to a report released by HSBC in June last, the real estate market as a whole is looking at several years of continued growth with increased demand for larger and higher quality homes as part of the new normal.