Dubai's Short-Term Rentals: A Lucrative Opportunity
Dubai: New Property Owners Convert Units for Short-Term Rentals; Here's Why:
The potential for short-term rentals has become a key selling point for properties. Over the past three years, Dubai has witnessed substantial growth in Airbnb listings, currently numbering between 25,000 and 30,000. This growth, notable in 2024 compared to the previous year, is expected to continue, offering a significant opportunity for investors, although certain considerations must be taken into account before diving in.
Since the introduction of a legal framework in 2016, short-term rentals have been fully regulated in the region, turning the Airbnb market into an attractive alternative income source for UAE citizens and foreign property owners.
We see property owners entering the Dubai real estate market for the first time and instantly converting their units for short-term rentals. Likewise, some of our clients are selling their properties to new buyers who then proceed with short-term rentals through us.
Villas vs. Apartments
The opportunity of short-term rentals has become an important selling factor for many properties, and it frequently arises in conversations between buyers and real estate agents. A common question is which is more profitable concerning short-term rentals and investment opportunities: villas or apartments? There is significant interest in both. Whether it's a family seeking the privacy of a villa or friends wanting to experience urban life in Dubai – a diverse demographic is coming to the city.
Short-Term vs. Long-Term Rentals
Short-term rentals offer complete freedom for property owners over their assets. This dynamic business ensures that landlords are not stuck in long lease contracts, allowing them to adjust their strategies to their needs at any time. On average, the short-term rental market offers returns 20% higher than long-term leases over a two to five-year period.
What to Know Before Investing?
There is no doubt that there are vast opportunities in Dubai today. The year 2023 set a tourism record with the number of international tourists growing by 19% annually. This year also started promisingly. According to the latest report from Dubai’s Department of Economy and Tourism (DET), the city hosted over 5 million overnight stays from January to March 2024, representing an 11% increase compared to the same period in 2023. Dubai recently announced the construction of a new passenger terminal at Dubai World Central (DWC) airport, which will attract further investments and tourists to the area.
However, it is important for investors to thoroughly understand the market before entering. For example, areas like Dubai Marina, Jumeirah Beach Residence, Palm Jumeirah, and Downtown offer high nightly rates, but since property values are high, they do not always provide the best returns. Currently, some of the highest investment returns can be found in areas such as Jumeirah Lake Towers (JLT) and Jumeirah Village Circle (JVC). These deals are now rarer as prices have risen, but they are still available for those willing to make the effort.
Previously, Dubai was attractive only to the wealthy and those seeking luxury retreats, but now it adapts to all budgets and preferences, which is great for the short-term rental market, providing a more diverse offering.
Regarding new trends, it is observed that people are renting for longer periods, working from vacation rentals, and groups of friends are renting larger units. Developments are happening in Barsha South, Meydan, and Dubai Creek, among others, which will be very interesting areas this year.
With all this in mind, investors should consider their objectives and which market they aim for, as this will greatly impact their property's success. Conduct research, seek appropriate advice, and be clear about your plans.
