Dubai rental yields ‘near 10% in cheaper areas’

Affordable housing ‘continues to dominate demand’ – Chestertons

PHOTO: The average rental yield for apartments in Dubai stands at 7.5%, Chestertons said. Credit: Shutterstock

Rental yields in cheaper areas of Dubai stand at almost 10%, as affordable housing “continues to dominate demand” in the market, according to Chestertons.

Gross rental yields across the city stand at 7.5% and 4.7% for apartments and villas respectively, the property agency said.

But landlords “continue to benefit from higher rental yields” in secondary locations. Rental yields are approaching 10% in the most affordable areas, such as Discovery Gardens and International City, Chestertons said.

“Overall, market yields have retained some degree of attraction as we saw residential prices drop in the first three months of the year, with apartments proving to be the most successful option in terms of yield. And it is the secondary locations that are once again offering the highest yield, ranging from 7.7% at Dubai Silicon Oasis to 9.5% and 9.6% respectively at Discovery Gardens and International City,” said Declan McNaughton Managing Director UAE, Chestertons MENA.

“However, despite ongoing sustained demand for affordable rental units, as end users look to reduce the cost of living by relocating to secondary communities, the villa segment still provided an overall average yield of 4.7%, which is encouraging for investors in it for the medium to long term,” he added.

Despite the high rental yields in some areas, there was an average 0.5% decrease in apartment rental prices during the first quarter of 2016, with Downtown Dubai recording the highest drop of approximately 5%, Chestertons said.

In secondary locations, a one-bedroom apartment is currently renting for between AED 55,000 and AED 73,000 with a two-bed unit from AED 75,000 and AED 95,000.

At the top end of the market, a one-bed in DIFC rents for an average of AED 118,000 per annum while a two-bedroom apartment is going for an average of AED 163,000.

Villa rents on Palm Jumeirah registered a decline of 2.5%, with three-bedroom villas going for an average of AED 325,000 and four-bed residences for AED 448,000. “Mudon is the most affordable villa community currently, with three-bed homes renting for AED 188,000 per annum and four-beds for AED 203,000,” Chestertons said.

McNaughton said the outlook was not positive for the Dubai rental sector.

“The outlook is less than rosy… with rental demand expected to be weak at current prices as the economic situation could adversely affect the disposable income levels of residents and we expect to see further correction of rental rates in the high-end apartment and villa segment as the year progresses,” he said.

Average apartment sales prices recorded a negligible 0.7% drop, while the villa sales market recorded an average 1% decline in Q1.

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