20/11/2024
Property price trends and actual rate of return on investment (ROI) are always of great interest for investors in Dubai. Besides, trends in property sale prices are useful for those who plan to make Dubai their home as well.
So, at BSO, we reviewed the market to share in this post such important details as apartment price trends in Dubai and its popular communities, apartment types, and rental yield. To clarify, selecting an apartment as a searching basis was dictated by its high demand in the market both for buy-to-own and buy-to-rent purposes.
There we times when real estate prices were boosted to a high degree. However, in 2016 we faced the changed trend and since then have been experiencing a decline in property sale prices. In total, an average apartment in Dubai now costs about 25% lower than four years ago.
Such a substantial sale price decline was partly due to the smaller footage of newly constructed properties. Nevertheless, apartment median sale prices per square foot decreased as well being of AED 1,034.00 in 2016 and of AED 951.00 at the beginning of 2020.
But do not let these numbers fool you. To clarify, they don't speak about the oversaturation of the real estate market in Dubai as it still has great demand capacity. On the contrary, they indicate great flexibility of the prices to construction costs and the government policy to increase attractiveness and affordability of property in Dubai for the world.
There are various types of apartments offered for sale and rent in Dubai. To clarify, we classify all apartments depending on the basis:
First, regarding a unit size, apartments take forms of a studio or an up to five-bedroom apartment. A studio apartment combines all the accommodation facilities in a single room. In other words, such an apartment doesn't have the bedroom, living room, and kitchen as separate rooms but integrates all of these into the one living space. In contrast, a one-bedroom unit is designed as a flat with a bedroom that stands discrete from the living room. So two-three-four-five-bedroom apartments are with the difference in the number of bedrooms in these apartments is two, three, four, and five, accordingly. Such apartments typically have a bathroom attached to every its' bed (though with exceptions). Besides, multi-bedroom flats could be equipped with an extra for-guest-designed bathroom.
Second, furnishings basis divide all mentioned apartments on furnished and unfurnished units. That is to say, furnished units are equipped with kitchen appliances (up to utensils; though, it depends) table and chairs, beds and sofa, and so on while unfurnished are not.
At last, there are affordable and luxury apartments in Dubai. Typically, affordable units are provided with basic facilities and amenities such as central air conditioning, laundry, shared pool, etc. On the contrary, luxury apartments may have extra amenities such as private Jacuzzi, barbecue area, etc.
Though the property sale price trend fully describes the situation in Dubai apartment market as a whole, there could be some variations when taken by communities.
Perhaps, Dubai Marina, Palm Jumeirah, and Downtown Dubai are the most prestigious communities. Thus, not surprisingly, apartments in these areas enjoy the highest prices. For example, its median prices per sq. ft. vary from AED 1,300.00 in Dubai Marina to AED 1,950.00 in Downtown Dubai with the same one in Palm Jumeirah of AED 1,730.
Moreover, while prices per sq. ft. for apartments in many communities decreased during the last year, the same ones in Downtown Dubai faced a moderate growth of 5.6 percent. Flats in Dubai Marina and Palm Jumeirah can't boast with such a success but its prices per sq. ft. decline just by 3-4 %.
Jumeirah Lakes Towers (JLT) and Jumeirah Beach Residence (JBR) go straight after the aforementioned communities when regarding median sales price per sq. ft. For example, the price in JBR is AED 1,330.00 while in JLT it is about AED 1,030.00. Apartments in these areas faced a decline of 4 –16% in JBR area (with the exception of 1-bed apartment where there was a growth of 14%) and of 6 to 17% in JLT area.
First of all, let's clarify the essence of the term. Rental yield is the ratio between annual unit rent and the sum of money you spent when purchasing it and arranging for the lease. Calculated as a percentage, it shows what part of your initial investment returns to you through the rent at the end of the year. For example, you invested AED 1,000,000.00 into your bought-for-rent real estate asset. It brings you a rental of AED 100,000.00 a year. Hence, your rental yield is 10%.
Of course, a rental yield differs from unit to unit depending on many factors:
In general, a rental yield varies from 3 to 11 percentages, though may be of a higher rate. Typically, commercial property brings a rental yield of 3-5 % on average. However, factories and other real estate assets rented for industrial use have ROI of 8 to 11 percent. As for leasing residential property, its owners have an average rental yield of 4-7 %. These numbers are stable for units located in popular communities but may vary on a bigger scale in other ones. It is worth to mention, residential units of smaller size are more affordable for tenants but brings higher rental yield for its landlords.
To sum up, with its relatively low current prices and good rental yield, property in Dubai becomes even more attractive than it was, for example, five years ago. So, get connected with BSO for professional assistance if you plan to purchase property or rent it out.
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