Affordable homes offer good yields

Landlords in Discovery Gardens enjoy rental yields of up to 10.2% according to ChestertonsImage Credit: Supplied

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 more affordable developments of Discovery Gardens (10.2 per cent), International City (9.4 per cent) and Dubai Silicon Oasis (7.9 per cent), while apartments returned 7.5 per cent gross yield across the board on average.

In terms of villa yields, the average across Dubai was 4.8 per cent, but the stand out performerswereThe Springs (6.4 per cent), Jumeirah Village Triangle (5.9 per cent) closely followed by Victory Heights (5.8 per cent).

“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,” said Declan Mc-Naughton Managing Director UAE, Chestertons MENA.

“With an 8.5 per cent average yield, studio apartments outperformed larger apartments by almost 2 per cent, while more than doubling the yield generated by a five-bedroom villa over the same period,” added Mc- Naughton.

The resilient performance in apartment yields was all the more  impressive given rental rates during Q2 were down on average 0.95 per cent while sales prices were up 0.7 per cent on average squeezing margins. Remraam leasing rates declined 3 per cent during Q2 - a one-bedroom apartment now leases for Dh 58,000 per annum. At the top end of the market, a one-bed unit in DIFC rents for an average of Dh115,000 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 Dh1,350 per square foot, while a similar apartment in DIFC and Downtown Dubai costs Dh1,960 and AED 2,218 per square foot respectively.

In the villa market, rental rates in Jumeirah Islands and Jumeirah Golf Estates fell on average by 5 per cent in Q2 compared with the previous quarter. A three-bedroom villa in Al Furjan currently rents for Dh175,000 per annum, compared with Dh203,000 per annum in Arabian Ranches and Dh360,000 per annum on Palm Jumeirah.

Villa sales prices were relatively stable as well in Q2. A three-bedroom villa in The Lakes sells for Dh1,350 per square foot while a similar property in JGE sells for Dh1,515 per square foot. Villas on Palm Jumeirah top the charts, with asking prices averaging Dh2,379 per square foot.

Overall transactions in Q2 were down just 6 per cent at Dh26 billion, compared with the previous quarter, however, sales transactions were up 17.5 per cent. After a solid beginning to the year, when mortgage approvals jumped by over 50 per cent, Q2 actually witnessed a 20 per cent fall by comparison.

Source: Property Weekly


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