Residential rental yields in Dubai are among the world’s highest, but a new investment category can fetch investors up to 20 per cent.
The new asset class, according to Cluttons, a property consultancy, is worker accommodation.
“The variety of investment options available in Dubai range from low-end, high-yielding residential units in peripheral schemes such as International City and Discovery Gardens, to more sophisticated investment options in the office market, where yields can range from 6.5 per cent to 9 per cent. We are also witnessing the emergence of worker accommodation as an increasingly popular asset class, which can offer yields of between 10 per cent and 20 per cent,” said Faisal Durrani, Head of Research, Cluttons.
The Global Property Guide, a website that compiles and analyses property price performance of the world's big economies, has said Dubai offers rental income on average of 7.1 per cent, which is one of the highest in the world. In comparison, gross rental yields in Hong Kong are 2.82 per cent, India 2.22 per cent and Singapore 2.83 per cent, London between 2.72 per cent and 3.20 per cent.
A number of developers have been projecting rental yields of between 6 per cent and 10 per cent to attract investors/buyers.
The high rental yield and capital appreciation are among the factors attracting global High Net Worth Individuals to the UAE, with the consultancy’s “2016 Middle East Private Capital Survey Part 2” showing Dubai, Abu Dhabi and Sharjah to have emerged as the most popular investment destinations for the regional wealthy.
The survey has found 63 per cent of GCC HNWIs planning to invest in real estate during 2016. Of those surveyed, 27 per cent named Dubai as their top three destinations within the GCC, while 21 per cent chose Abu Dhabi and 8 per cent Sharjah.
In April 2016, a new report by Standard and Poor’s Ratings Services said that lifting of sanctions on Russia and Iran, oil price recovery and a weakened US dollar will strongly benefit the recovery of the property market.
“We still believe that the lifting of geopolitical restrictions, such the sanctions on Russia and Iran, could strongly benefit the recovery of the UAE property market. This would open new investment flows into the regions' real estate markets and partly compensate for the softening demand from other countries,” the ratings agency said.
“A rebound in oil prices as well as weakening US dollar would also likely reverse the negative trend,” it added, quoting industry experts that real estate prices have declined by 10 to 13 per cent on average in 2015.
“The strong US dollar has made UAE real estate more expensive for international investors holding non-US-dollar liquidities, and weaker tourist sentiment has affected retailers and their landlords,” S&P said.