Dubai’s real estate market: What should investors look at in 2022?

Historically, the real estate market in Dubai has developed in cycles.

In 2005 we saw a major peak that resulted in a crash in 2008. It didn’t take long for the market to recover and in 2014 we were back at an all-time high, only the market crashed in 2018. The year 2021 has seen real estate at an all-time high again, which only adds to speculation as to when it will crash again.

I don’t think it will – there might be a slight correction, but I think the days of big moves down are over. The market is more mature today. Nowadays, an investor can build a portfolio and get double digit growth on the investment even in times of downturn.

These are the investors we are currently seeing in the Dubai property market:

1. The old-fashioned fin: These are the ones who made millions during the real estate boom of 2004 and 2005 by buying pre-launched properties and converting them for triple digit returns within days or weeks. By the time the property reached the end user, the value had doubled or tripled – the main reason the markets kept correcting themselves. These investors will see fewer opportunities as the developers are currently using the first flips themselves. This leads to better projects being built.

2. End user: They form the basis for every real estate market in the world. As Dubai’s population continues to grow, end users will always take up a large chunk of the space and provide the necessary stability.

3. Investors looking for returns: This was the investor who lost in Dubai last year. Also, with the laws assisting the tenant, it has become very difficult – if not impossible – to quit a tenant who is paying a low rent, reducing the return on investment for the investor. For this investor, a 3-5 percent return is simply not attractive enough.

The vacation rental market has brought several benefits to the real estate space in Dubai, so I think the days of the big crashes are long gone. I think you will see steady growth and slight corrections, if any, over the next few years.

As an investor who wants to build a portfolio and generate a steady income from their investments, short-term rentals offer between 8 and 15 percent return after all costs. Another advantage is that, unlike a long-term tenant, the property is also well-maintained and easy to sell.

With this return, it is an attractive investment area for large funds and family offices.

Real estate in Dubai is also undervalued compared to world cities. And because of this, investors can potentially double their money over a five-year period through short-term rental income and real estate growth.

For comparison, if you book a one-bedroom apartment on Palm Jumeirah or JBR in a building with access to a private beach, you have an investment of approximately $ 650,000. An apartment of the same quality in LA, Miami, New York or Barcelona would cost between $ 1.5 million and $ 2 million.

The combination of finally increasing supply in Dubai and short term rentals will steer the market from a major crash towards a slowdown, only to rise again a few years later.

Dubai’s real estate market will have to grow enormously in the next 10 years as new projects are being announced again and again. But I’m sure, considering inflation, you won’t get the same one bedroom for $ 680,000 in 10 years; By then we would have reached global levels and the same unit will be valued at over $ 2 million.

Vinayak Mahtani is the CEO of bnbme vacation rentals