Dubai apartments still yielding annual returns over 10% says Chestertons’ latest Q2 2016 report

Dubai - MENA Herald: Chestertons MENA, a leading international property agency, has released its latest residential market report for Dubai today (27 July 2016), which recorded little or no movement in sales or rents resulting in a relatively flat performance throughout Dubai in Q2 2016.
However, it did note that landlords continued to benefit from solid rental yields, especially those owning apartments in the more affordable developments of Discovery Gardens (10.2%), International City (9.4%) and Dubai Silicon Oasis (7.9%), while apartments returned 7.5% gross yield across the board on average.
In terms of villa yields, the average across Dubai was 4.8%, but the stand out performers were The Springs (6.4%), Jumeirah Village Triangle (5.9%) closely followed by Victory Heights (5.8%).
“Overall, apartments tend to provide a higher average yield than villas and especially those in the more affordable developments. This bodes well for developers of any upcoming projects in Dubai fitting this category, as they will surely attract investors, no doubt pleasing tenants on modest incomes,” said Declan McNaughton Managing Director UAE, Chestertons MENA.
“With an 8.5% average yield, studio apartments outperformed larger apartments by almost 2%, while more than doubling the yield generated by a five-bedroom villa over the same period,” added McNaughton.
The resilient performance in apartment yields was all the more impressive given rental rates during Q2 were down on average 0.95% while sales prices were up 0.7% on average squeezing margins.
Remraam leasing rates declined 3% during Q2 - a one-bedroom apartment now leases for AED 58,000 per annum. At the top end of the market, a one-bed unit in DIFC rents for an average of AED 115,000 per annum, while a similar property in Dubai Marina rents for 80,000 per annum.
On the sales side of the apartment market, a one-bedroom apartment in The Greens now commands AED 1,350 per square foot, while a similar apartment in DIFC and Downtown Dubai costs AED 1,960 and AED 2,218 per square foot respectively.
It was a similar tale in the villa market. Rental rates in Jumeirah Islands and Jumeirah Golf Estates fell on average by 5% in Q2 compared with the previous quarter. A three-bedroom villa in Al Furjan currently rents for AED 175,000 per annum, compared with AED 203,000 per annum in Arabian Ranches and AED 360,000 per annum on Palm Jumeirah.
Villa sales prices were relatively stable as well in Q2. A three-bedroom villa in The Lakes sells for AED 1,350 per square foot while a similar property in Jumeirah Golf Estates sells for AED 1,515 per square foot. Unsurprisingly villas on Palm Jumeirah top the charts, with asking prices averaging AED 2.379 per square foot.
Overall, transactions in the second quarter were down just 6% at AED 26 billion, compared with the previous quarter, however, sales transactions were up 17.5%. After a solid beginning to the year, when mortgage approvals jumped by over 50%, Q2 actually witnessed a 20% fall by comparison.
“As for the outlook, in the absence of any major catalyst, the market will remain slow during Q3 and rental demand will continue to be weak. However, the mid to longer term market fundamentals are strong with numerous tourism related projects driving the economy towards Expo 2020,” commented McNaughton.