The rental returns on premium real estate investments in the UAE are at least three times higher than having cash in the bank according to the Middle East’s largest private developer, DAMAC Properties.
The rate of interest on a six-month fixed term deposit at HSBC is 2.1%, compared to rental yields in the UAE of between 7-12%, according to property consultancy CB Richard Ellis.
“Rental yields are extraordinarily high in the UAE, compared to most other countries around the world. Now that prices have stabilised in premium locations, the high yields make investing in the UAE property market an attractive proposition for any global investor” said Niall Mc Loughlin, Senior Vice President of DAMAC Properties.
Another important factor for investors to consider is the favorable tax environment in the UAE. Rental income is tax free, and there are no capital gains taxes levied on the sale of properties.
“The rental yields alone are attractive for investors, and coupled with the tax-free investment landscape, property in the UAE is an extremely attractive asset class for any investor, anywhere in the world” said Mc Loughlin.
Since the beginning of the year, DAMAC Properties has seen a marked increase in sales and enquiries from foreign investors in particular.
“Over the past couple of years the market has been dominated by end users, but we are now seeing a return of the investors. However, unlike the peak of the market in 2008, they are not chasing capital growth; they are focusing on rental yields. It’s a very different market dynamic” Mc Loughlin added.
The positive sentiment is shared by real estate advisory firm, Cluttons, which predicts good quality; well-established developments will continue to do well at the expense of newer residential areas. The firm also anticipates the residential market will continue to gain from increasingly available mortgage finance options at competitive rates.
“Investors are coming back to the market, not because they think the price of their property will double in a matter of months, but because they are comfortable with consistent, sustained and globally competitive rental returns” Mc Loughlin pointed out.
DAMAC Properties is experiencing the strongest demand in three years across its range of premium developments at Dubai Marina, Downtown Dubai and the DIFC. There is a strong flight to quality in both Dubai and Abu Dhabi, as existing residents seek to upgrade and new buyers aim to take advantage of market conditions which currently offer extraordinary value for money.
“The UAE real estate market has become increasingly fragmented which means there is little benefit in reviewing the market as a whole. We are now seeing demand and prices rising convincingly in premium locations within Dubai, but these price gains are to some extent being offset by price declines in some of the Emirate’s less sought after locations, such as International City” said Mc Loughlin.
The developer is also extremely optimistic about the prospect for strong rental yields in the hospitality sector. DAMAC Properties is strategically focused on the serviced apartment development model, with construction continuing at pace at its ‘Burjside Boulevard’ project in Downtown Dubai, overlooking the Dubai Mall and Burj Khalifa.
“We’ve seen extremely strong interest in this particular project in 2011 and we expect that to continue in 2012. Once our Burjside Boulevard serviced apartments are handed over to customers, we anticipate rental yields above 15 per cent” commented Mc Loughlin.
DAMAC Properties is an internationally recognised, luxury-focused, high-end developer. With a proven track record for delivering some of the most luxurious residential properties across the Middle East region, the developer is well capitalised and has the vision and momentum to provide solid investment opportunities for customers across all the markets in which it operates.