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01 March 2024

Rental income in Dubai expected up to 7%

Survey published by Knight Frank shows emirate is rated 8th most important city for the well-heeled in 2015, ahead of Beijing and Zurich. (File)

By Parag Deulgaonkar

Apartment sale prices in Dubai fell 3.7 per cent, mid first-quarter, pushing rental yields to 7 per cent, reveals Phidar Advisory’s new report.

“Sale price decline is outpacing rent declines, pushing yields up to 7 per cent for apartments. Villa segment saw prices decrease 3 per cent and marginal increase in yield for villas,” the Dubai-based real estate consultancy said in its note 'Mid-Quarter, Q1-2015 on Dubai Residential Market'.

Apartment lease rates registered a nominal decrease of 0.5 per cent, while lease rates for villas decreased 2.4 per cent.

However, the Reidin.com rent index for January 2015 showed rentals going up 0.67 per cent, showing a year-on-year (y-o-y) increase of 11.8 per cent.

Read: Expert forecast wrong for January 2015: Dubai rents rise

UK-based Global Property Guide, which collates real estate data from across the world, puts gross rental yields for apartments in the range of 5.87 per cent to 7.21 per cent, with rents averaging $21 per square metre per month for large apartments and $22 per square metre per month for small apartments. Remember, there is no tax on your rental income in the UAE.

Jesse Downs, Managing Director of Phidar Advisory, one of the author’s of the report, feels the market performance will depend on a confluence of exogenous and endogenous factors over the next 12 to 30 months.

The consultancy expects rents will continue to soften as sale price declines outpace rental declines, which will allow yields to gradually expand through 2015.

“The 2015 new supply forecast is up to 25,000 residential units, which is significantly higher than 2014, and will cause rents will undergo a gradual ‘affordability’ adjustment,” she adds.