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Insights into investments, rental yields and market dynamics

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Investing in Dubai’s real estate sector, particularly in studios, 1-bedroom and 2-bedroom apartments, is a popular choice for investors looking for residential properties, according to a recent market study.

The study, conducted by Colife, a UAE-based rental housing and property management company, provides valuable insights into investments, trends and the current market situation.

The study shows that investments in apartments in Dubai generally only pay for themselves after around 8 years, with tenants consistently achieving an annual rental yield of 7-8 percent. However, this amortization period can be considerably shorter if the increase in the value of the property over time is taken into account. On average, rental yields in Dubai are between 5 and 7 percent and can reach up to 11 percent annually for properties with high liquidity.

As an example of a successful case study, the study cites a customer who contacted Colife in December 2022 because he was looking for a property for less than 150,000 dollars with a good return. A studio in the sought-after Al Furjan neighborhood was found, purchased for $122,110 and rented for $1,259 per month, resulting in a remarkable 10.7 percent annual return.

The Colife study underlines the popularity of studios, 1-bedroom and 2-bedroom apartments among investors who are guided by customer preferences. The preferences of prospective tenants include service charges included in the rent (47.6 percent), a convenient location (42.8 percent), a free 24/7 service (4.7 percent) and community events (4.7 percent).

In terms of choosing a neighborhood to invest in Dubai, the study recommends looking beyond the districts and focusing on specific towers within them. Popular areas for rental properties are Dubai Hills, The Greens, Creek and JLT. However, the study advises careful consideration and points out potential problems in seemingly popular areas.

The study also looks at the dilemma between off-plan and resale, noting that the decision depends on the homeowner’s objectives, budget and availability on the market. Some investors opt for unplanned properties because they assume that they will be able to sell them at a profit later on, but the study warns of a possible loss in value during construction or after completion.

In terms of cost, the average price for a studio in Dubai is around 260,000 dollars, which equates to approximately 3,000 dollars per square meter. The study underlines the importance of setting a preferred starting price in order to achieve a high return on investment and a shorter payback period.

Rental prices in Dubai have risen by an average of 8-10 percent since the beginning of 2023. Prices for short-term rentals in particular have risen by an impressive 30 percent due to the transition from the summer to the high season. The cost of long-term rentals has also risen significantly by 27-30 percent since January 2023.

The study concludes by predicting a further increase in both real estate prices and rents in Dubai due to the emirate’s plans to double its economy by 2033, attracting global companies and skilled professionals to the city. These factors are expected to contribute to overall growth and further investment in the real estate market.


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