Buyers in Dubai need to focus more on the potential rental yield income than the capital gains sales price when making a purchase decision, according to the CEO of emirate’s largest real estate agency.
A survey by Better Homes found 88 percent of 1,400 residents surveyed rent their accommodation, leaving just 12 percent opting to own their own home.
Ryan Mahoney, CEO of Better Homes, said purchasers needed to focus on this factor when making their purchase decisions. “Chasing capital gains is stressful,” he told the audience at the 8th Arabian Business Forum on Tuesday in Dubai.
When determining where to achieve the best yields, Mahoney pointed to less glamorous areas such as Discovery Gardens, Jumeirah Lake Towers (JLT) and International City.
In International City some smaller units rental levels grew by 70 percent, Better Homes found. In JLT, Better Homes reported it had twice as many tenants looking for homes to rent, compared to landlords offering their properties for rental.
Additionally in Discovery Gardens, Mahoney said there were now more tenants chasing homes than there were units becoming available.
“This is due to an oversupply of tenants and high demand,” Mahoney said. As a result, yields in Discovery Gardens are higher, at around eight percent, compared to 6.5 percent on average across Dubai.
When comparing sale prices, Mahoney said the average sales prices were AED15,000 per sqm in Dubai, compared to four times that in London. However, average rents were AED80 per sqm, only half that in London.
Therefore, Mahoney said the yields in Dubai were a lot higher than comparable western and emerging market cities like London or Singapore.
Looking at the market as a whole, Mahoney said high end villas in luxury developments achieved the lowest overall yields. "Let's use [rental yields] as a benchmark," he advised when making purchasing decisions.