According to a recent market study, investors seeking residential assets in Dubai commonly opt for studios, as well as 1 and 2-bedroom apartments.

According to a recent study on investment trends, the average payback period for investments in Dubai apartments is approximately 8 years, with consistent tenant occupancy and an annual rental yield of 7-8%. However, when factoring in property appreciation during this period, the payoff duration can substantially decrease.

“Typically, the rental yield in Dubai averages between 5-7%, reaching up to 11% annually for properties with high liquidity," says Tahera Zaman, International Investment Consultant for New Build and Off-Plan at Victorstone.

She added, “Nevertheless, with the year-on-year increase in the property's value itself – estimated at a 14-15% rise from mid-2022 to mid-2023 for property prices in Dubai – the payback period is expected to decrease,"

"We identified a studio in Al Furjan, an area with consistently high demand for rental apartments, and assisted our investor in acquiring it for $122,110. Within just one month of finalising the deal, we successfully leased the apartment for $1,259 per month, resulting in a 10.7% annual return,"

British, Indian, and Chinese buyers are at the forefront of international investors in Dubai.

For investors seeking residential assets in Dubai, studios, 1-bedroom, and 2-bedroom apartments are the favoured choices.

Potential tenants prioritise utilities included in rent (47.6%) as their top consideration, closely followed by convenient locations (42.8%), 24/7 free services (4.7%), and community events (4.7%) when searching for rental apartments.

Investors purchasing property aim to generate a steady income, similar to investing in stocks or shares in funds to receive dividends.

"Investors view their Dubai real estate as a long-term asset, serving to safeguard their capital from economic and political risks in their home countries," stated Tahera. The success of real estate investments hinges on factors such as the current market situation (prices, property liquidity), housing type, location, and the property management company responsible for renting out the acquired apartment.

When considering the optimal neighbourhood for real estate investment in Dubai, the study emphasises the importance of going beyond general districts and concentrating on specific towers within them.

"In even the most sought-after areas, there are towers we've identified as problematic due to issues such as mould in apartments caused by poor ventilation, frequent elevator breakdowns, and underdeveloped infrastructure," explained Tahera. Investors often lack awareness of the intricacies associated with each tower.

On the flip side, she mentioned that hidden gems can be found in less mainstream areas.

"These may involve apartments priced below market rates, with owners motivated to sell quickly for personal reasons or because they have already benefited from the property's value appreciation and opt to cash in, even if the value continues to rise."

Another opportunity arises from "cancel" offers, where a buyer withdraws from a deal, and the right to purchase their apartment is transferred to a new buyer.

"Among our rental clients, the most sought-after areas include Dubai Hills, The Greens, Creek, and JLT," said Tahera.

Determining whether to opt for off-plan or resale properties has no definitive answer. It significantly relies on the future homeowner's goals, budget, and the current market offerings.

Many investors frequently favour off-plan properties intending to sell them later.

"However, this strategy doesn't always yield positive results. Occasionally, the apartment's value may decrease during construction or by the time the tower is completed,"

The decline in value can be attributed to factors such as developers initially setting an inflated price for the property or the overall property market conditions in Dubai.

"We primarily handle resale properties as most investors approaching us aim to purchase and promptly rent out their apartments for income generation. Moreover, these properties do not come with a higher price tag compared to brand-new ones," Tahera explained.

For instance, in Dubai Marina in 2023, property prices on the primary market saw an increase of over 33%, while on the secondary market, it was just over 15%. During the same year, however, primary properties in Dubai Hills experienced a rise of 14.95%, and secondary properties increased by 22.18%, she noted.

"So, when deciding between off-plan or resale, it's crucial to focus on the specific property rather than just the neighbourhood," emphasised Tahera.

The average cost for a studio in Dubai is approximately $260,000, translating to roughly $3,000 per square metre.

"Although there isn't a fixed price ceiling, investors can certainly indicate a preferred starting price to target a high return on investment (ROI) and, consequently, a quicker pay-off period,"

Additionally, the research unveiled a significant demand for both short-term and long-term rentals in Dubai.

An average increase of 8-10% in rental prices in Dubai from the onset of 2023.

"Short-term rental prices experienced a significant 30% surge, attributed to the conclusion of the summer season and the commencement of the high season in Dubai. Meanwhile, long-term rental costs have also seen a substantial rise, ranging from 27-30% since January 2023,"

Furthermore, the research emphasised that both property prices and rentals in Dubai are poised to continue their upward trajectory. This trend is influenced by factors such as the emirate's ambitious plan to double its economy by 2033, leading to a growth in the number of global companies and skilled professionals relocating to the city.

"These factors are anticipated to propel both property and rental prices upwards," Tahera concluded.

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