Rental strategies in Dubai: short or long term?

In Dubai’s dynamic real estate landscape, investors are faced with the crucial decision to opt for either short or long-term leasing strategies with the aim of achieving lucrative returns. This choice is an important one as it influences potential returns.

Short-term rentals

In Dubai, short-term rentals typically refer to leases that last less than a year. This option attracts a specific target group: Tourists, business people and foreign students who primarily stay in areas such as Palm Jumeirah, Downtown Dubai and Dubai Marina. Rental periods can vary daily, weekly or monthly, and prices usually include utilities and internet charges, giving landlords considerable flexibility in pricing. A notable trend is the growing popularity of Dubai as a tourist destination, as evidenced by the 1.2 million year-on-year increase in visitor numbers from January to May 2023. The average yield for this type of rental is between 8-12%.

The positive aspects include the opportunity for increased returns, for example by adjusting prices depending on the season, as well as constant demand, particularly in areas popular with tourists. There is also the advantage of using the property yourself during the low season. On the other hand, the increased change of tenants can mean increased administrative costs. However, this can be managed efficiently by using local service providers.

Long-term rentals

In contrast, long-term rentals in Dubai are usually for a period of at least one year. This strategy particularly appeals to families, young couples and local business people moving into areas such as Dubai Creek Harbour, Mohammed Bin Rashid City and Jumeirah Lake Towers. The contracts offer increased stability, guarantee a steady income and foster long-term relationships with tenants. According to the latest figures from the Dubai Statistics Center, the city’s population reached 3.6 million in July 2023, an increase of over 50,000 residents since the beginning of the year. This signals a continued increase in demand for long-term rental properties. The average yield for long-term rentals is between 5-8%.

Long-term rentals offer a number of attractive advantages. A continuous and predictable income is made possible by stable, long-term contracts. The reduced administrative outlay, thanks to stable tenant relationships, makes it easier to manage the property. In addition, these long-lasting contractual relationships make it possible to build trusting relationships with tenants, which in turn has a positive impact on overall property management. Of course, there are also considerations, such as the more limited flexibility in pricing during an ongoing contract, but overall, long-term letting ensures a steady and reliable return.

Conclusion

Real estate investment in Dubai presents a complex but rewarding venture where choosing the right rental strategy can make all the difference in returns. While short-term rentals offer the opportunity to benefit from seasonal price adjustments and higher prime yields, long-term rentals offer a more stable and less management-intensive investment opportunity.

The optimal choice is largely influenced by the investor’s individual preferences, risk profile and long-term market forecasts. An informed decision requires a thorough investigation of current market trends, an accurate calculation of potential returns and a comprehensive valuation of the properties.