Gross rental yields in Dubai are among the highest in the world, with smaller apartments offering rental income of 7.21 per cent, according to Global Property Guide.
The gross returns on investment from large to small apartments ranges between 5.87 per cent and 7.21 per cent, according to the website that compiles and analyzes property price performance of the world's big economies.
In comparison, gross rental yields in Hong Kong stand at 2.82 per cent, India 2.22 per cent and Singapore 2.83 per cent, while London is between 2.72 per cent and 3.20 per cent. Hence, it is onne of the factors driving Indians, Pakistanis and British citizens to invest over Dh5 billion in the realty market here in the first quarter 2015.
Rents from small and medium-sized apartments average $22 per square metres (sqm) per month, while large apartments rent for a little less at $21 per sqm per month.
Looking from the landlord's point of view, these rental levels mean that a 75 sqm apartment can earn rental income of around Dh6239, or $1,700 per month, while 120 sqm and 160 sqm apartments can earn rental incomes of around $2,700 and $3,700 per month, respectively, and 225 sqm apartments can earn a monthly rental income of around $4,800 per month.
The rental yields research indicates that some good fundamentals underpin Dubai's property market. Medium-sized apartments (120 sqm and 160 sqm) sell for an average of $4,000 per sqm, large apartments (225 sqm) cost more, around $4,300 per sqm and smaller apartments (75 sqm) are cheaper, selling for around $3,700 per sqm.
“This is an unusual pattern - smaller apartments usually are more expensive than larger apartments (per sqm) in the other major world cities,” the company adds.
JLL and Knight Frank, global property consultancies, expect property prices to decline by 5 to 10 per cent this year. However, Moody’s Investors Service has said the government spending on infrastructure and encouraging more foreign investments in various sectors will support the real estate market over the next five years.
Rents have not fallen at the pace of price decline, therefore yields remain high. Moreover, master developers have been trying to reduce service charges, helping owners to pay less for maintenance of their building and community.
Dubai is expected to create over 277,000 new jobs in the run up to the Expo 2020 with the market not likely to face any oversupply in the housing market.