At this price point, experts should expect a gross yield of 7 to 9 percent in some areas of Dubai, according to real estate consultants
Dubai real estate assets valued at AED 1.5 million ($408k) offer the best long term returns for potential investors, according to real estate consultants from Cluttons Middle East and JLL.
According to Cluttons, market activity in studios, one, two and three-bedroom apartments valued at this price range are the most active segment in Dubai’s real estate sector.
“At this price point one and two bedroom apartments in an established area are dominating most of the activity in the market,” said Richard Paul, head of professional services for Cluttons Middle East.
“This is also the case for prospective owner occupiers who wish to cease paying rent.
“It does depend on where the individual sits financially, but if they have adequate equity, it makes sense for them to contemplate paying off their own mortgage and look at real estate as a mid and long-term investment,” he added.
Paul added that he would invest that families looking to invest should look at properties below the AED 1.5 million price point.
“At this price point, even if the decision is to lease the property investment out, post-acquisition, a purchase should expect a 7 to 9 percent gross yield in some areas and subsequently after interest payment, service charges and upkeep, there is still good profit rent to be achieved,” he added.
Bottom of the cycle
JLL research suggests that while residential prices in Dubai have fallen around 20 percent since the last market peak in October 2014, the market is likely approaching the bottom of its cycle, with only limited further declines expected over the next year.
“The majority of expatriates in the UAE have traditionally sought to rent rather than purchase properties,” said JLL Mena head of research Craig Plumb.
“As the market has become more mature, with less price volatility than in previous cycles, expatriates can be more confident to buy at close to the bottom of the current cycle to benefit from potential long-term capital growth.”
Plumb added that recent changes to visa laws will also likely increase demand for property across the country.
“The case for purchasing properties is further strengthened by the attractive payment plans that are currently being offered by developers that are keen to dispose of unsold off plan units and the increased choice of low-to-mid market product available for sale,” he said.
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