Dubai Tops Global Real Estate With 8pc Rental Returns
Dubai currently leads the global real estate sector in terms of investment locations among the major cities, with returns averaging 7-8 per cent per annum, compared to the best performing cities in the world, according to a report by Private Finance, London-based independent mortgage advisors.
The cities of Liverpool and Nottingham are the best performing property investment locations in the UK, stated the report released ahead of The International Real Estate and Investment Show (IREIS).
The biggest international names in the real estate and investment industry will take part in IREIS 2018 â€“ UK Edition which will be held at the Queen Elizabeth Centre from June 22 to 23. The two-event serves as a one-stop shop for UK investors seeking for the perfect investment opportunities in the UAE, said the organisers.
Both cities logged average rental yields of 6.2 per cent so far in 2018, once mortgage costs are taken into account, the report said, leaving them tied for the best buy-to-let performance among the 50 UK towns and cities Private Finance analysed.
However, they both lag behind Dubai, something that still prompts British buyers to invest in Dubai's real estate.
British nationals have invested Dh31.1 billion ($8.47 billion) in Dubai's real estate during the last four years (2014-2017), according to the statistics released by Dubai Land Department (DLD).
Of these, property buyers from the UK have invested Dh6 billion in 2017, Dh5.8 billion in 2016, Dh10 billion in 2015 and Dh9.3 billion in 2014, revealed the DLD statistics.
Sensing this, a number of UAE property developers have tried to reach out to British home buyers and investors, by setting up offices and appointing brokers to promote Dubai's real estate in the UK, especially in key cities of London, Manchester and other centres.
According to the experts, the UK is one of the largest investment source markets for Dubai's real estate. Although the annual investment has been declining from Dh10 billion in 2015 to Dh5.8 billion in 2016, this has somewhat bottomed out in 2015 and grew marginally to Dh6 billion in 2017.
A recent global report, World Cities: Mapping the Pathways to Success, by Jones Lang LaSalle, the global real estate advisory, puts Dubai amongst the best hybrid cities in the world, saying: "A group of Hybrid cities, best epitomised by Dubaiâ€¦ they are medium-sized, compete in specialised markets and have a superior liveability equation compared to their national and regional peers."
"Most Hybrid cities saw high levels of foreign investor activity during the last cycle. Dubai is among the world's top destinations for FDI, while Warsaw leads on cross-border commercial real estate investment," the report said.
Dubai Land Department recorded 69,069 real estate transactions with a total value exceeding Dh285 billion ($77.6 billion) in 2017, including Dh107 billion ($29.15 billion) investment by 39,480 investors through 52,958 billion â€“ more than 65 per cent of which is by foreign investors.
The overall value of the land transaction of Dubai, worth Dh285 billion is higher than the GDP of 144 countries in the world â€“ according to the list of 211 countries prepared by the United Nations.
"Dubai's real estate sector is strong and the emirate has unique assets to attract foreign capital in this sector including a high return on investment, which strengthens investor confidence" remarked Sultan Butti Bin Mejren, the director-general of Dubai Land Department.
"By creating a secure and welcoming environment for real estate investment, which involves protecting investor rights through escrow accounts, we help foreigners to benefit from flexible payment plans and more attractive investment offers in the real estate sector" he added.
The average return on investment (RoI) achieved on apartments in Dubai last year was 7 per cent, while villas made 5 per cent, despite an overall softening of rent and sales prices, said a key UAE property portal Bayut.com based on 94,000 listings on Bayut.com between November 2016 and November 2017.
According to experts, most of Dubai's residential stock of 490,000 homes are leasehold properties, with a large chunk of the villas owned by UAE and GCC nationals.
Foreigners mostly rent homes although tens of thousands of freehold homes are also owned by foreign nationals.
Antoine Georges, the managing director of Dome Exhibitions, said: "On an average, a Dubai tenant can own a freehold home by spending 12-13 years of rental expenses in his property, instead of paying them to his landlord."
"Over the last ten years, Dubai Land Department has strengthened the regulatory environment to ensure the best practice at all levels of the property development, marketing, valuation, sale, purchase and brokerage activities in order to ensure timely delivery of properties and maximum protection of investment," he stated.
Georges pointed out that for a Dh1 million two-bedroom apartment, an investor could reap rental return of Dh80,000, which is 8 percent annual rental return.
"The investor could recover the entire investment within 12.5 years. However, if one looks at some of the post hand-over payment plan where the investor/buyer pays only 50 percent, or Dh500,000 at handover, with the rest payable in 3-5 years, the return on investment is double as the rent from day 1 would be Dh80,000, or 16 per cent," he added.-TradeArabia News Service