A Glimpse at Rental Yields in Dubai

Many Dubai freehold communities provide high yields for investors despite under-pressure rental values, according to the property listings portal propertyfinder.

Emerging neighbourhoods provide the highest rental yields in Dubai, although these districts remain under construction.

Apartment yields have been under pressure in 2016, indicating rental values have fallen more than sales prices

Villas, despite seeing bigger price declines, have performed better in terms of yield changes
Villas in The Springs and Arabian Ranches provide higher yields than apartments in many other districts

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, a pioneering report by propertyfinder shows.

The report reveals apartments in most of the top 20 Dubai neighbourhoods posted small sales price declines this year, including JBR (-2.4%), Dubai Marina (-2.8%) and Downtown (-3.3%). Silicon Oasis, Motor City and Business Bay made small gains. These movements, which don’t necessarily lead to similar changes in rents, have impacted yields.

Lukman Hajje, Propertyfinder Group chief commercial officer, says: “The Downtown price decline has helped improve the rental yield, which is looking sluggish compared to other apartment options.”

Downtown’s 5.5 percent yield contrasts with the similarly desirable locations of Dubai Marina and Palm Jumeirah, which both give over 6 percent.

The data broadly shows Dubai’s cheaper freehold areas offer the biggest apartment yields – midmarket districts such as The Greens and JLT generate yields of 7.5-8.1 percent, while the emirate’s “emerging” communities including Sports City, Silicon Oasis and Discovery Gardens provide yields of over 9 percent.

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.

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.

That buy-to-let investors achieve a better return in areas typically accommodating lower income workers indicates there is price floor for renting property in Dubai which does not necessarily track sales price movements, while lower yields in high-end districts suggest buyers there paid a premium that tenants are unwilling or unable to meet.

The lower end emerging apartment communities saw signs of decline in for-sale properties as a large number of new and off-plan projects with completed stock in these areas entered the competition, the report states. However, these same communities are now offering rental yields of over 9 percent, which makes them very interesting to high yield seeking investors.

Villas typically offer lower yields, although Arabian Ranches and The Springs outperform many apartment districts in providing yields of over 6.4 percent, roughly double the more exclusive neighbourhoods of Palm Jumeirah and Emirates Hills.

In terms of yield changes from January-August, Jumeirah Village Circle achieved by biggest increase among villas, rising 2 percentage points to 8.0 percent, followed by Arabian Ranches and the Lakes, which both gained 1 percentage point. Emirates Hills endured the biggest yield decline, falling from 3.74% in January 2016 to 3.04% in August of the same year. Yields rose in 10 of the 15 villa communities in which there was comparative data.

Apartments performed less well, with yields near-flat in most communities, while Discovery Gardens and International City both suffered declines of more than 2 percentage points.