Mid-market and lower end properties offer higher rate of returns, according to Propertyfinder research
Some of Dubai’s newer freehold districts offer property investors among the highest yields globally despite a difficult 2016 for the emirate’s rental and sales markets, according to a new report by Propertyfinder Group.
The report, which has been complied by mining the data available on propertyfinder.ae, reveals apartments in most of the portal’s top 20 Dubai neighbourhoods posted small sales price declines this year, including JBR (-2.4%), Dubai Marina (-2.8%) and Downtown (-3.3%), Propertyfinder said in a statement.
The Silicon Oasis, Motor City and Business Bay made small gains, the statement said, adding that these movements, which don’t necessarily lead to similar changes in rents, have impacted yields.
“The Downtown price decline has helped improve the rental yield, which is looking sluggish compared to other apartment options,” said Lukman Hajje, chief commercial officer, Propertyfinder Group.
The 5.5% yield in the Downtown area contrasts with the similarly desirable locations of Dubai Marina and Palm Jumeirah, which both give over 6%, the portal said.
The report broadly shows Dubai’s cheaper freehold areas offer the biggest apartment yields, with midmarket districts such as The Greens and JLT generating yields of 7.5-8.1%, while the emirate’s “emerging” communities including Sports City, Silicon Oasis and Discovery Gardens provide yields of over 9%.
“These are world-leading rental yields but these communities are far from complete, with a large scale of development scheduled over the next 5-10 years,” said Hajje. “More stock will come online, suitable for budget-conscious purchasers and renters but, conversely, as the area becomes more developed it will offer more for both owners and renters.”
According to Propertyfinder, the fact that buy-to-let investors achieve better returns in areas typically accommodating lower income workers indicates there is a price floor for renting property in Dubai, which does not necessarily track sales price movements. Lower yields in high-end districts suggest buyers there paid a premium that tenants are unwilling or unable to meet, the statement added.
Villas, meanwhile, typically offer lower yields, Propertyfinder said, although Arabian Ranches and The Springs outperform many apartment districts in providing yields of over 6.4%, roughly double the more exclusive neighbourhoods of Palm Jumeirah and Emirates Hills.
“The general rule is the larger and more expensive the villa, the lower the rental yield,” Hajje added.
In terms of yield changes from January-August, Jumeirah Village Circle saw the biggest increase among villas, rising two percentage points to 8.0%, followed by Arabian Ranches and the Lakes, which both gained one percentage point. Emirates Hills saw the biggest fall in yield, from 3.74% in January to 3.04% in August this year. Yields rose in 10 of the 15 villa communities in which there was comparative data, Propertyfinder said.