Dubai’s meteoric rise as a property investment hub is one for the textbooks. Unmatchable infrastructure, a business-friendly environment, a dynamic economy, and properties that touch the skyline – Dubai is where most people want to be.
In 2024, Dubai climbed to the seventh position in the global competitiveness ranking by the IMD. According to study, the number of HNWIs in the UAE is expected to rise to over 228,000 by 2026, marking a 39% increase. This brings into view the rental property market which HNWIs eye as an investment.
And if you’re ready to set foot into the ever-changing real estate investment landscape of Dubai, it’s time you get proficient in the terminology set to come your way, especially the term rental yield.
To become an astute investor who understands the worth and performance potential of their property, is important to know how rental yield works, how it is calculated, what influences it, how to maximise it, and where you can get the best yield on your investment.
What is Rental Yield
Simply put, rental yield is the amount your property makes yearly via rental income relative to the investment you’ve made. It’s expressed as a percentage and is a good snapshot of how profitable a rental property is, helping you gauge if it’s worth the investment.
How to Calculate Rental Yield
One simple formula is all you need to calculate rental yields. Divide the annual rental income the property makes by its total investment cost or current market value and multiply by 100.
The two types of rental yields are Gross and Net rental yields. The Gross Rental Yield is an overview as it doesn’t take into account expenses like property taxes, maintenance costs, insurance, vacancy periods, etc. The Net Rental Yield considers the additional expenses and the vacancy rate to give a more exact idea of what your property’s actual rental yield could be.
While rental yields for apartments in Dubai generally fetch between 7-10%, villas can generate between 4-6%.
Dubai’s Rental Market
An increasing number of expats relocating to Dubai for work or personal reasons means the city is a hotspot for rentals and real estate developers are catering to this need by building extensively, to meet demand and replenish stock. The Dubai Land Department showed that the total number of rental renewed contracts increased by 11.9% indicating that long-term tenancies provide stability to investors.
Factors Influencing Rental Yields in Dubai
Location: Prime locations near Dubai metro stations, office hubs, supermarkets, and bustling communities fetch higher rental yields than others – Downtown Dubai, Business Bay, and Dubai Marina are leading examples.
Property Type: Apartments tend to fetch higher rental yields than villas because of greater tenant demand.
Amenities: Larger living spaces and properties with additional amenities tend to fetch higher rental yields.
Government policies and economic trends: Dubai being a burgeoning hub of talent drives up rental investment. An oversupply of properties or changing government regulations and rent caps or adjustment to property ownership laws may also influence rental yields in the city.
Luxury Locations in Dubai with High Rental Returns
AL Barari: The region’s first integrated luxury and eco-conscious development, Al Barari is made up of beautiful gardens, freshwater streams, and naturally landscaped lakes. Favoured by Ultra High Net Worth Individuals (UNHWIs), for a lifestyle centred on tranquillity and well-being, it has exceptional investment potential, bringing in yields of up to 6% in villas that exemplify opulence.
Downtown Dubai: Downtown Dubai is a unique mix of luxury and entertainment offering a cosmopolitan cultural experience. Its iconic landmarks such as the Burj Khalifa and the Dubai Mall, provide an unmatched experience for living, working, and leisure. With top-notch dining, shopping, and entertainment options, along with upscale residential spaces and modern amenities, Downtown Dubai epitomises the rapid growth and innovation of the city. This sought-after location consistently draws in investors, thanks to its outstanding potential and impressive returns between 6 - 7%.
Palm Jumeirah: Dubai’s iconic palm-shaped island, an engineering marvel – home to Atlantis, The Palm, and Atlantis The Royal – offers a mix of branded residences, villas, mansions, five-star resorts, exclusive beach clubs, and more. The palm fronds’ private waterfront residences makes it a particularly attractive location for both, international investors and UNHWIs delivering substantial long-term capital appreciation with yields up to 5.34%.
Emirates Hills: Surrounded by a lush golf course and sparkling lakes and often dubbed as the Beverly Hills of the UAE, this premium development features luxury villas with top-tier amenities. According to data, property prices in Emirates Hills grew by approximately 5% in 2023 showcasing its potential to attract long-term tenants, with estimated rental yields of 4.9% per year.
Dubai Hills Estate: One of the city’s most exclusive communities, Dubai Hills Estate is renowned for its lush parks and 18-hole championship golf course. It features prime villas that offer a lifestyle of comfort and indulgence. With a robust yield of 6.04%, it stands as a premium choice for investors seeking luxury and enduring value.
Jumeirah Beach Residence (JBR): The pinnacle of coastal luxury and refined living located along Dubai’s beautiful shoreline, JBR combines elegant residential options, top-notch dining, and upscale retail experiences. With breathtaking views of the Arabian Gulf, exclusive beach access, and cutting-edge amenities, JBR is a highly desirable spot for investors boasting a gross rental yield of around 7%. Its exceptional mix of modern design, prime location, and unparalleled convenience has cemented its reputation as one of Dubai’s top luxury communities offering impressive returns and premium lifestyle.
Maximising Yields
For investors, achieving optimal returns often starts with zeroing in on the right location. Areas in prime locations and with high demand, whether driven by tourism or exceptional infrastructure, offer better potential for growth. Furnished apartments perform better because they cater to tenants seeking convenience. Short-term rentals through platforms like Airbnb can unlock extra earning potential. Another element worth evaluating is service charges. It will help to align them with market standards to maximise profitability. Lastly, being flexible, allowing minor aesthetic updates, considering pets, and being attuned to tenant preferences can increase rental income.
A robust economy, significant infrastructure developments, and a rapidly growing influx of affluent individuals all play a part in growing Dubai’s capital appreciation and attractive rental yields. Recent government policies, including the introduction of long-term residency visas and attractive tax incentives for foreign investors, further establish Dubai as a premier global investment hub. Additionally, the city's status as a leading financial and tourism centre ensures a steady demand for premium properties. With data-driven insights and a strategic approach, investors can confidently explore Dubai’s dynamic market to secure both long-term growth and consistent income streams.
