How shifts in rental demand are dictating the Dubai property market.
As the Dubai property market moves towards maturity, the shifts in the rental property market are beginning to dictate investment decisions. We take a look at why this shift is seeing a decreasing emphasis on the more tourist orientated destinations towards destinations such as Jebel Ali and Jumeirah Village.
Working in the Dubai property market, we are constantly asked by clients where we feel is the best place to invest in Dubai, with the majority of questions focusing on the better known developments such as Dubai Sports City, Dubai Marina and the ever popular Waterfront area. Investors focusing on high yield, short term holiday accommodation have traditionally led the tune throughout the emirates property sector.
More recently however, we have seen an increase in the number of investors looking to buy property in areas such as Downtown Jebel Ali and Jumeirah Village South where tourism revenue is less of a focus. So what is causing this shift? Why are investors turning their backs on the short term rental market which has fuelled the demand for property in the region since its inception?
Recent months have seen a distinct change in the Dubai property sector, as more challenging global financial conditions have permeated into the previously impervious Dubai real estate sector. Whilst previously investors saw the majority of developments in Dubai offering the long term returns ‘en masse,’ today is seeing a more considered approach from property investors as increasing amounts of due diligence are being carried before each purchase.
If one is to break down this shift, and look at the underlying factors, it is apparent that the level of emphasis on the end user has increased dramatically in the past six months. Previously, in the early days of the Dubai property boom, the 20-30% annual returns somewhat negated the requirement for the end user or tenant. In comparison with the large returns available, the inconvenience of having a tenant was often deemed unnecessary.
Today however, the recent changes in the economic climate have increased the importance of the end user, and increasing numbers of investors are now seeing this as a necessity rather than an optional extra. As the Dubai property sector gradually evolves to a more mature state, it is likely that this trend will continue.
So how has this change in emphasis changed the Dubai real estate market, and what does this mean for people looking to purchase property in the emirate in the coming months and years?
In recent years we have seen the majority of the property investment in Dubai focusing around the more tourist orientated destinations such as the Dubai Marina, the Waterfront and Dubai Sports City. Nowadays however, investors are more focused on buying real estate that present a more viable solution long term rental option, and destinations such as Downtown Jebel Ali and Jumeirah Village South are becoming increasingly popular investment options.
Looking at this shift on a more macro level, it would be wrong to suggest that the long term emphasis on the tourist destinations will diminish. There is still a considerable demand for tourist accommodation in Dubai, and hotel occupancy rates are still relatively high given market conditions. As more tourist destinations come online, and enter the global public consciousness, it is likely that tourist accommodation in the region will remain strong in the long term. However we are seeing an increase in emphasis on the end user, and an acknowledgement from investors that people are in Dubai for the long haul.
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ABOUT THE AUTHOR
Mark Burns is a Partner at Property-Dubai.tv, a Dubai real estate specialist selling a wide range of off-plan and resale property in Dubai.