Tourism A Blessing For Dubai Buy To Let Investor
Over the last few years, Dubai has proven to be a darling of the property investment world both in the Middle East and beyond, continuing to offer high rental returns and a very good capital growth rate of close to 10% that we see today.
However, the development of Dubai has not only been limited to the real estate sector, the tourism sector has grown by leaps and bounds in the last 3 years alone. Tourists staying in Dubai hotels amounted to 5.4 million in 2004, while in 2006 tourists staying in Dubai hotels grew significantly to 6.5 million people. With a number of hotel rooms and apartments at 40,862 in 2006 and the Dubai government aiming to reach a target of 8-10 million tourists by 2010, it shows that there is currently a significant gap between growing demand and availability. of tourist accommodation supply which can be felt more and more as upcoming major attractions such as Dubai land and Dubai Sports City open their doors to the public.
This level of growth in the tourism industry in Dubai has led to a very high occupancy rate for hotel rooms and apartments, for example the occupancy rate stood at 85% in January 2007 alone. This has presented to Dubai and UAE property investors as a whole with splendid potential to capitalize on this growing market, the traditional method of property investment such as buy to let in Dubai can offer investors a rental yield of around 8% annual. However, short-term renters are charged hotel rates per night which, depending on the location and quality of the properties, owners can earn an annual rental yield of 10-15% on hotel rates. current.
This is a situation that is not limited to Dubai alone, but is also highly applicable in other Emirates such as Ras Al Khaimah, especially in established resorts such as Al Hamra Village, where hotel accommodation is not sufficient to meet demand.
A common question from many investors is how best to take advantage of the accommodation supply gap in Dubai.
There are two main routes buyers can take in regards to this:
- The first method is to buy an apartment or villas and use a high-quality property management company that will take over the property from investors. Typically, the administration fee will be 20-25% of an apartment’s rent per year. It may also be necessary to purchase a furniture package from a property management company, the cost of which can range from £2-£5K.
- The second option available to investors is to purchase a hotel apartment in one of the key tourist locations of the future such as the Sports City in Dubai, such as The Cube. [http://www.miragerealestate.co.uk/Property.php?pageNum_rsMaster=3totalRows_rsMaster=40&&PropertyID=53]. These developments are often run by 5* hotel companies who, on many occasions, give investors rental guarantees and a 30-day free hotel stay. These are developments that in most cases will be fully managed, maintained and furnished at no additional cost to you.
Real estate investors who are looking for long-term investments and who do not intend to move into their properties should consider hotel apartments as their ideal investment solution. It is a type of property that does not require any significant effort on the part of investors in terms of finding a property management company capable of maximizing property rental turnover, thereby saving time and money. Short-term vacation rental is the ideal buy-to-let option for the savvy Dubai investor, with rumors of rent stabilization in the traditional buy-to-let market, vacation home rentals present some of the best potential for high sustained rental income.
By
Hamid Shah
Director of Mirage Real Estate Ltd. [http://www.miragerealestate.co.uk/]