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Wed 18 Jan 2017 12:45 PM

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Rental yields of 9% in Dubai 'under pressure', says property expert

Highest yields reported in Discovery Gardens, Dubai Silicon Oasis, Jumeirah Village Circle

Rental yields of 9% in Dubai 'under pressure', says property expert
\nA report by Reidin.com found Dubai to be the only city to have “consistently” given rental yields of over 7 percent compared to the average of 4.5 percent in cities such as Moscow, Sau Paulo, Hanoi, Shanghai and Manila.

Rental yields in Dubai will face pressure this years as rents will decline at a faster pace than prices, according to a real estate consultant.

A report by Reidin.com found Dubai to be the only city to have “consistently” given rental yields of over 7 percent compared to the average of 4.5 percent in cities such as Moscow, Sao Paulo, Hanoi, Shanghai and Manila.

“In the fourth quarter 2016, we witnessed a drop in rentals within most of the developments compared to property prices,” Hamza Betraoui, Managing Partner, Land Sterling, said.

“The same trend will continue and net yields will drop, as investors will shift their investments to more affordable homes in order to maintain healthy returns,” he added.

Kalpesh Sampat, chief operating officer, of SPF Realty however, said that rental yields will climb up from second half of 2017, driven by higher demand for houses.

In fact, the latest Land Sterling report said rental yields in Discovery Gardens fell to 9 percent in the fourth quarter 2016 compared to 9.1 percent in the same period 2015 though prices were up one percent but rents declined 10 percent year-on-year.

In Dubai Silicon Oasis, the yield rose to 9.1 percent from 9 percent, driven by a 2 percent price gain in comparison to a 5 percent drop in rents.

Rental returns in Jumeirah Village Circle dropped to 9 percent from 9.4 percent. Prices shot up by 6 percent while rents fell 9 percent.

Downtown Dubai reported the lowest rental yield last year though it rose to 6.2 percent from 5.9 percent. Sale prices and rentals dropped 5 percent and 12 percent, respectively.

Gross yields on Palm Jumeirah remained stable at 7.4 percent. Prices remained stable though rents declined by 5 percent.

Rental returns in International City slipped to 8.3 percent from 8.7 percent with prices and rents dropping 6 and 10 percent, respectively.

Another report by Global Property Guide, a company that analyses property price performance of the world’s big economies, gave a grim report, stating yields averaged 5.2 percent to 5.9 percent till September 2016.

“Yields in Dubai are ok, but the ‘days when Dubai generated stratospheric yields are gone’.  This is a volatile market and home prices swing up and down,” it said.

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