Dubai, a city of skyscrapers, massive shopping centres, and opulent resorts, has spent billions establishing the best tourism infrastructure in the world. The city of superlatives has been consistently topping the lists of Guinness World Records for its outstanding landmarks and famous attractions. Among them are the Burj Khalifa, the tallest building in the world, and the Ain Dubai (Dubai Eye), the tallest Ferris wheel, located on Bluewaters Island. Dubai, with 237 skyscrapers, is the fourth-highest metropolis in terms of both number and height!
Dubai – The city of superlatives
The princely sands of the Gold emirates offer a tempting selection of must-do activities, from skydiving to spectacular Dubai safari expeditions. The Dubai Frame, Museum of the Future, and Dubai Miracle Garden, the largest natural floral garden in the world, are a few more well-known sights to see in Dubai. The Dubai Mall, one of the greatest places to buy luxury brands in Dubai, is the biggest shopping mall in the UAE and has the size of 50 soccer fields.
The inception of investment hub through blooming real estate sector
Due to the city’s booming tourism industry and status as the Middle East’s most technologically advanced hub, Dubai’s hotel industry has developed into a land filled with a cascade of lucrative investment opportunities. Dubai, the second-wealthiest emirate in the UAE, has a currency pegged to the US dollar, making it possible for foreign investors to purchase properties for sale in Dubai and enjoy stable lucrative returns. Recently, Mukesh Ambani has bought the most expensive villa in Dubai for $163 million making it the most expensive deal in Dubai for a villa.
Since Dubai’s hotel boom, the hotel business has grown by 40% yearly, placing it third among the world’s top cities for foreign direct investment. It’s a typical conundrum for many people buying real estate in any of the vital tourist areas in Australia.
Holiday homes vs. Long term rentals – What is better investment option?
Should your investment property be included in the long-term residential rental pool or kept as a Holiday Home with short-term vacation rentals while the family isn’t using it? From Dubai Marina to Downtown Dubai, Al Qudra Road to Business Bay, and International City to Jumeirah Village Circle, all property investors are wrestling with the same quandary. Regular rents are lower, but returns are generated all year long.
Holiday homes management becomes easier with real estate holiday managers or platforms attracting higher rents, but typically just during the busiest holiday seasons. So, to help you out of this pickle, we have highlighted the advantages and disadvantages of both investing options. With the help of these, you will be able to make an informed decision!
Long term rental homes
The cost of prime real estate in Dubai has increased by 89 percent over the past year. Furthermore, those figures have climbed by more than 100% in well-known areas like Palm Jumeirah, Jumeirah Bay, and Emirates Hills as wealthy purchasers have waited in line to purchase real estate in the city’s newest hotel projects. For instance, in July 2022, a home on Palm Jumeirah sold for a record-breaking $82 million. Across the course of two days in September, the city’s real estate sales totalled 386. They topped $325 million, 341 of which were acquisitions of apartments, condos, and villas in upscale gated communities all over the city.
Following a busy 2021 for the city, which saw $35 billion in real estate transactions, the highest year since the 2008 financial crisis, this activity is hot on the heels of the city. Due to a continuing influx of ultra-high net worth individuals focusing on Dubai’s elite districts in quest of second homes, prime residential values in Dubai have continued to improve and increased by 29% in just the third quarter.
Benefits of long-term rental homes
Generating a passive income is one of the key benefits of investing in long-term rental properties in Dubai. This implies that you can make money without doing anything to earn it. Long-term rentals also benefit from being more stable than other investment options. Regardless of the state of the economy, people will always need a place to reside. When it comes to investing in Dubai real estate, it is also worth reading about: Which is better investment: Holiday Let or Buy to Let? It will help you reach a well-informed real estate investment decision.
The drawbacks
It’s not entirely passive income, though. You’ll be responsible for finding tenants, paying rent, and handling maintenance concerns. The good news is that holiday homes management and property management companies can help you avoid the trouble. Long-term leases also have the drawback of not necessarily being as rewarding as other kinds of investments. This is because the rental market can be unstable, and rents may increase or decrease based on the state of the economy.
Holiday homes
Short-term rental demand among visitors to the United Arab Emirates has greatly expanded, supported by a consistent development in the tourism industry and effective holiday homes management options, and most of it is due to post-COVID travel preferences combined with remote job choices.
Additionally, the FIFA World Cup in Qatar in November will further propel the number of tourists visiting the area. One of the strongest quarters for the local tourism business was the first quarter of this year since the United Arab Emirates tourism industry grew faster than it did in 2019. According to property agents in Dubai, over 7.12 million foreign overnight guests spent the night in Dubai alone in the first half of this year, a rise of 183% year over year.
Advantages of holiday homes
Holiday homes can be far more profitable than long-term rental properties in Dubai, which is one of their key benefits. When people travel, they are constantly looking for places to stay, and the cost of vacation rentals is typically greater than regular rent. Also, with holiday homes management companies, investors can sit back and enjoy the profits!
The drawbacks
Buying a vacation home can be riskier than other forms of investment, which is one of the key drawbacks. This is because rates and demand for holiday rentals can be quite unstable. However, if you reside in a region where tourism is active all year round (like Dubai), purchasing a one-bedroom apartment on the Palm might be the best course of action. The key factor is location.
The verdict
Long-term rental property investments might be an excellent passive income strategy. They can, however, be more time- and effort-intensive to handle than other kinds of investments. Holiday homes, on the other hand, might be more profitable and easier to manage with holiday homes management companies. In the end, which you choose will depend on your particular situation. It can be ideal if you have the time and patience to manage a long-term rental property. However, a holiday home can be a better choice if you’re seeking a more passive investment, especially with the FIFA Cup just around the corner.
The team HFRE is available at +971 4876 2473 or you can write us an email at info@hfre.ae to discuss your investment plans and preferences with us and we will help you make a well-informed investment decision.
