(MENAFN- Khaleej Times) Dubai remains an attractive market for property investors despite softening rents and sale prices this year as the emirate still offers stable returns on real estate investment, a latest report says.
Property portal Bayut.com's annual report for 2017 indicated a seven per cent and five per cent average return on investment on apartments and villas, respectively, in Dubai this year.
It identified Dubai Marina as the most sought-after area for both renting and buying apartments this year, while Mirdif and Arabian Ranches led the pack in villa renting and buying, respectively. It noticed Dubai International City as the most affordable popular area for both renting and buying apartments, while Mirdif offered the lowest-priced villas and townhouses in the emirate.
"As more and more off-plan projects are completed in 2018, handed over and put on the secondary market, we can expect prices continuing to attract investors while landlords will have to stay competitive to entice potential tenants," chief executive of Bayut.com Haider Ali Khan said.
"In the long run, as the market and the broader economy move on a trajectory of diversification and maturity, the opportunity for developers and sellers to capitalise on their investment remains strong," Khan added.
Atif Rahman, director and partner of Danube Properties, said Dubai is perhaps one of the best real estate markets from an investment perspective, where rental return on investment is one of the highest.
"Typically, an investor can easily fetch seven to 10 per cent annual rental returns, depending on the location, product quality and size of the property. In most developed markets worldwide, the rental yields vary from two to five per cent," Rahman said.
"The other aspect of investing in Dubai is the presence of an extremely sound regulatory environment that makes the investment in Dubai's real estate an absolutely safe proposition - regardless of which location you invest in. So, from real estate investment point of view, Dubai offers one of the best investment opportunities when compared worldwide."
Prabhakar Raghavendra Rao, joint managing director of Gemini Property Developers, said real estate assets - residential, commercial, retail and hospitality properties - in Dubai offer one of the highest rates of return on investment, compared to most metropolises in the world.
"Depending on the location, size and the quality of the property, buyers could recover the total investment in 12-15 years - one of the fastest rates of return on investment due to high rental yields. That's one of the reasons why there won't be any shortage of property buyers and investors in Dubai and the UAE - no matter how many properties are added to the existing properties every year," Rao told Khaleej Times.
Rents on decline
The report said apartment rents in Dubai remained on the decline with highest decrease of 16 per cent recorded in International City where tenants paid annual rents of Dh31,000, Dh42,000 and Dh65,000 for studios, one- and two-bedroom apartments, respectively. Dubai Silicon Oasis, Mirdif, Bur Dubai, Deira and Al Nahda were other sought-after areas for renting apartments this year.
For villas and townhouses for rent, Mirdif was the top choice of tenants and followed by homes in Jumeirah, Al Barsha, Umm Suqeim and Arabian Ranches.
Mirdif was the most affordable villa community with yearly leases of Dh130,000, Dh145,000 and Dh150,000 for three-, four- and five-bedroom villas, respectively, with a 9 per cent to 13 per cent year-on-year drop.
Palm Jumeirah was the most expensive popular villa locality in Dubai this year with yearly leases of Dh315,000, Dh420,000 and Dh450,000 for three-, four- and five-bedroom villas, respectively, with a six per cent to 13 per cent year-on-year decline this year.
Sales prices more attractive
Dubai Marina was the most desirable Dubai community for buying apartments this year, followed by Downtown Dubai, Jumeirah Village Circle, Jumeirah Lake Towers (JLT) and Palm Jumeirah. Investors paid Dh850,000, Dh1.35 million and Dh2.2 million for studios, one- and two-bedroom apartments, respectively.
Palm Jumeirah remained the most extravagant popular area with studios, one- and two-bedroom flats, demanding Dh1.25 million, Dh2.4 million and Dh2.7 million, respectively.
In terms of investment in the affordable segment, Dubai International City remained the most cost-effective to investors as studios, one- and two-bedroom apartments were priced at Dh350,000, Dh475,000 and Dh850,000, respectively, roughly reflecting a 5 per cent decline from 2016.
Apartment types that bucked the trend were studios in Dubai Silicon Oasis and Dubai Sports City with a 1 per cent increase, one-bedroom apartments in Palm Jumeirah with a 5 per cent upturn and two-bedroom apartments in JLT with a 0.5 per cent rise.
Most of the interest for buying villas and townhouses in 2017 was observed in premium gated communities such as Arabian Ranches, Reem Community, Dubailand, Palm Jumeirah and The Springs, among others.
The most expensive well-liked area for buying villas is Palm Jumeirah with three-, four- and five-bedroom villas and townhouses commanding Dh8 million, Dh11.5 million and Dh15.5 million, respectively, with a 4 per cent to 9 per cent year-on-year decline from 2016.
Off-plan listings in Dubai Marina were the most sought community by investors followed by projects in Downtown Dubai, Jumeirah Village Circle, JLT and Dubai Silicon Oasis, according to the report.
"We have seen an overwhelming response to our apartments, a positive sign that the market is still robust with plenty of demand for high quality yet affordable properties," Muhammad BinGhatti, CEO and head of architecture at Binghatti Developers, said.
Referring to a report by Reidin/Global Capital Partners report, Rao said the total return of real estate assets in major cities such as Dubai, New York, Singapore and London stood between five and 11 per cent.
In Dubai and Singapore, he said real estate assets have returned close to 120 per cent in the form of rents and capital gains over the last 10 years, compared to 75 per cent in London and 63 per cent in New York. In Dubai, the majority of returns have been through rental increases.
"Going forward, affordable luxury properties will be on high demand. Therefore, those properties will command a higher and faster return on investment," Rao of Gemini Property said.
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