Dubai Short Term Rentals Witness Demand Surge in 2022

22 - Jul news

With high-rise skyscrapers, Michelin-star gourmet bistros, and adrenaline-induced desert safaris, it’s no wonder the world is drawn to this glamorous metropolis. Dubai has been declared as the world’s most popular destination for 2022 and ranked the fourth best place in the world to invest in a holiday home. The UAE first began introducing holiday home regulation and monitoring laws in 2016 for individual owners. Since then, the holiday homes market in the UAE has experienced significant growth, particularly since the beginning of the Covid-19 pandemic.

While hospitality and tourism were one of the most acutely impacted industries around the world due to Covid-19, the holiday homes market was not as severely impacted despite the similarities with hotels. Overall, the average hotel occupancy reported in the UAE was only second to China at 54.7% in 2020 as per the Ministry of Economy and World Tourism Organization. Meanwhile, holiday home companies reported 90% occupancy in the more popular locations.

The popularity growth for holiday homes in 2020 was mainly due to the privacy and space provided by them, making it the ideal choice for residents who were unable to travel as well as for the usual tourists.

The growth in demand for holiday homes in the past two years can also be attributed to the growth in the UAE population. While the population dipped by 8.4% in 2020, there has been a surge post-pandemic with the population surpassing the 3.5 million mark as of Q2 2022. The population is predicted to see continuous increases over the coming years, as the government aims to reach the 5.8 million mark by 2040, as per the 2040 Masterplan.

Effect of Staycation Boom on Short-Term Rentals

In 2021, the ‘staycation’ boom continued despite the easing of travel restrictions, which could be due to travelers practicing more caution regarding another sudden lockdown, and the trend seems to be continuing in 2022 as well. According to local newspaper The National (October 2021), UAE was among the top staycation markets during the previous summer season. Out of the residents living in the UAE, 92% enjoyed a staycation between the months of June 2021 and September 2021 (The National, October 2021).

Moreover, because of the efficiency with which the UAE government handled the pandemic, it effectively encouraged people from all over the world to relocate to the country, especially to Dubai. At the same time, this has also led to a boost in tourism and promoted Dubai as one of the most popular work-from-home destinations.

Dubai was declared as the world’s most popular destination for 2022, ranking ahead of bustling cities like London, Rome, and Paris. The title was earned upon the release of Tripadvisor's Travellers' Choice Awards for 2022: The Best of the Best Destinations. Dubai was also ranked the 4^th best place to invest in a holiday home among the top 50 global destinations as per research from Compare the Market (September 2021). The grading was done based on the following factors: weather, crime rates, entertainment, number of restaurants, cost of living, and property prices.

Why Invest in Holiday Home Property

One of the advantages of holiday homes being an ideal investment is the flexibility for the owner to use the property when it’s not occupied. Holiday homes are also more flexible in terms of revenue gains since landlords with regular leases cannot increase rental rates for existing tenants by more than 20% as per Decree No. (43) of 2013, article 1 of RERA (Real Estate Regulatory Authority of Dubai) rules. However, short-term rentals can be more beneficial to investors since the contracts offer more flexibility to the landlord especially for communities that are still developing.

One other key factor is the net profitability of holiday home investments. Real estate investments in Dubai typically will yield between 5-8% returns, however holiday homes earn significantly higher returns by about 20-30% as shown in The National (June 2022), depending on the location and type of property.

While short-term rentals provide higher yields, it is important to keep in mind that short term lets are subjective to seasonality, and therefore do not always provide a steady cash flow, especially during the off season. Nonetheless, during the peak season investors can recover their losses due to higher prices and an increased turnover. The target revenue for the year can easily be achieved by investors with the help of a property manager providing in-depth knowledge of the market.

Holiday homes are comparable to serviced/hotel apartments, with prices continuously increasing on a quarter-to-quarter basis. The prices overall increased by 9% between Q1 2021 and Q1 2022. While the rise in prices have made it more difficult for some to afford investing in property, the prices offered as per the area is still considered affordable in terms of prime real estate markets in the world.

Top 3 Holiday Homes Communities in Dubai

It is important to keep in mind that location is and always will be a key factor for investors to get the best return on investment. As per the analysis provided by our Be Our Guest Holiday Home department based on several queries and listings, the top 3 most popular locations for holiday homes in Dubai are:

1. Palm Jumeirah

2. Dubai Marina

3. Jumeirah Beach Residences

The key factors within these communities were due to the engaging activities and nightlife available. Furthermore, the Dubai market is providing numerous job opportunities to new and young professionals, especially those who have recently moved to the country with temporary accommodations. This has created significant demand in the market thus allowing holiday homes to access another form of renters in this new market in Dubai as per Zawya News (November 2021).

Finally, it is anticipated the demand for holiday homes will spike significantly due to the upcoming FIFA World Cup in Qatar in November and December 2022. This is the first ever World Cup hosted by a Middle Eastern country and is set to boost tourism across the Middle East. FIFA Tournament Time Demand Model (TTDM) has forecasted over 1.7 million spectators visiting Qatar to watch the World Cup.

Takeaways

The holiday homes sector is a relatively new market in Dubai. However, it has seen significant growth especially during the last few years. D&B Properties believe that this growth will only continue to rise as the Dubai market further matures and attracts investors, tourists, and more residents into the city. This could potentially lead to a new subsector created with short term rental properties being a new alternative means for investors looking for higher returns.

Produced by D&B Properties & VAS

D&B Properties

With nearly a decade’s experience in the UAE Real Estate market, D&B Properties is an acclaimed, award-winning firm and one of the leading brokerage companies in Dubai. Our success is defined by the gratification of our clients and the milestones we have achieved since our inception.

We have been recognized as the ‘Top Broker of Emaar’ in four consecutive years and have made premium collaborations with leading developers - such as Emaar, Nakheel, Dubai Properties, DAMAC, SOBHA - and listing platforms - such as houza, Bayut, Property Finder, and Yalla Deals.

Valuation & Advisory Services (VAS)

VAS produces comprehensive valuations of public or private real estate assets within MENA region, and provides consulting solutions to increase market value through detailed analysis and collated research

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