Affordable apartments offer highest returns in Dubai

While investing in Dubai’s residential property market brings to mind luxury villas and penthouse apartments, a recent report shows that affordable apartments are currently offering the highest returns on investments.

Morgan’s Dubai Real Estate Market Report Q1 2021 shows that apartments in Al Khail Heights, Discovery Gardens and Remraam have all offered over 8 percent average gross investment yields.

Dubai Creek Harbour offered the lowest rental yield, at 4.37 percent, while high-profile communities such as The Palm Jumeirah had a yield of 5.85 percent, Dubai Marina, 6.05 percent; Downtown Dubai, 5.66 percent; and Motor City, 7.56 percent.

Overall, villas produced lower yields, with Dubai Sports City offering the highest yield at 6.23 percent, and luxury development Jumeirah Islands the lowest yield at 3.93 percent.

Some of the emirate’s best-known communities produced higher yields: Arabian Ranches’ yield for villas was 5.44 percent; the Palm Jumeirah, 4.56 percent; Silicon Oasis, 5.26 percent; and Dubai Hills Estate, 4.66 percent.

Data from Morgan’s previous report in Q4 2020 showed that rental yields were stable quarter-on-quarter, with the only major difference being a spike in apartment rental yields for Dubai Investment Park at 9.69 percent, compared with 7.7 percent in Q1 2021. 

A Healthy Yield

Elias Hannoush, managing director of Morgan’s, said: “Four percent yield for a prime location property and six percent for a non-prime location property is considered a healthy yield. Some investors are trying to achieve above eight percent, but it is unsustainable.

“Although rentals have been falling for the past two years in Dubai, most Dubai communities are still achieving what’s considered to be a healthy yield.”

A draft law by Dubai Land Department, which seeks to impose a rent freeze for three years, would support yields in communities that are facing supply pressure.

“In some communities, rentals have started to recover, but this is minimal,” he said. “The main reason behind the [proposed] freeze is to keep rentals the same in communities that will have a lot of supply of new properties in the coming year and a half.”

Extensive Growth

On the sales front, the report cited ‘extensive growth in the overall Dubai property market performance’.

It showed an increase quarter-on-quarter for villa and townhouse prices, with the top three gainers being Emirates Living at 16 percent, The Villa at 14 percent, and Dubai Hills Estate and Jumeirah Golf Estate tied in third place at 12 percent.

Apartment sales prices in Culture Village increased by 14 percent, Dubai Hills Estate eight percent and City Walk and Jumeirah Beach Residence were in joint third place at six percent.