Decent rental yields and tax-free status means Dubai is still attractive to investors, says Knight Frank
Dubai’s real estate investment sector still “stands tall” among global capitals despite the emirate seeing the biggest property price declines in the world, according to Knight Frank.
The UK estate agency said recently that residential property prices in Dubai declined 12.2% in the year to June – pushing the emirate to last place in its Global House Price Index.
But while Dubai property sales prices continue to decline, rental yields in the mainstream segment have crossed the 7% mark, Knight Frank said.
Knight Frank added that there was only a 4.5% decline in prime residential prices in the year to June – smaller compared to the mainstream segment. It also pointed out that rental returns are tax free, marking an additional incentive to investors.
“Looking into the city’s sub-markets, the picture is a bit more positive as well. In-demand areas are mostly in the prime segment including villas, townhouses and apartments in the Palm, Emirates Hills, Dubai Marina and Downtown for example. Even during the 2008 downturn, prime properties saw lower levels of declines compared to less established areas,” noted Diaa Noufal, MENA Research at Knight Frank Dubai.
The report goes on to say that other regional markets are also trying to emulate Dubai’s quick development and gain a share of the inbound flow of global private wealth.
In Qatar, demand has been rising and most buyers are residents of the GCC, although the number of European buyers has been increasing as well, Knight Frank noted.
Oman property demand has been on the rise as well, with investors from the Middle East, India and Pakistani showing a lot of interest in recent years. This, the report says, could be due to relatively strong annual investment returns of around 6% and also partly due to the potential for some buyers to secure residency.
Abu Dhabi seems to be following Dubai’s model of development, albeit on a smaller scale, Knight Frank said. Prices in the UAE capital rose by 5% in the twelve months to June 2015, it added.
Knight Frank’s outlook suggests that Dubai and Abu Dhabi will continue to remain the focus for most investor activity in the region due to their potential for economic growth.
With the Expo 2020 coming up, Dubai’s market is expected to mature further, promising better returns for investors, the report concludes.