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Emerging from infancy: Short-term letting stock is on the rise in Abu Dhabi

Change in law has created new wave of holiday homeowners

Call it foresight or lucky timing, the legitimisation of Abu Dhabi’s short-term rental market coincided with a steady period of resident and tourist population growth in the UAE’s capital city. New government regulations launched in 2020 by the Department of Culture and Tourism paved the way for Abu Dhabi to open its arms to business and leisure tourists, as well as an onslaught of new expats laying down their own foundations to make the city their home.

A low barrier to entry in the market – a straightforward permit application with the DCT, completed easily within 30 minutes online – makes short-term letting an attractive and lucrative investment opportunity for existing and prospective Abu Dhabi homeowners.

Abu Dhabi’s maturing but undersupplied letting market

With overall population growth up an estimated 1.68 per cent annually in Abu Dhabi (source: UN World Urbanisation Prospects), plus another tourist season predicted to outperform last year’s 24 million visitors (source: DCT), the maturing short-term rentals market will continue to welcome new properties to the market and high returns for early investors.

Frank Porter has acquired 10 short-term letting properties in Abu Dhabi. Our occupancy rate is over 90 per cent and remains steady as the market strives to keep up with demand. According to data from AirDNA, Abu Dhabi’s total active listings have reached 962, marking a 381 per cent increase from just 200 short-term rentals on the market in June 2021.

The law change also welcomed a new wave of holiday homeowners, keen to profit on their property when they are out of the country. Seasonal fluctuations show no signs of slowing the market down. Part-time home occupiers can be confident they’ll get the high occupancy they need to make a positive return, with 33 per cent of active listings available just 1-90 nights of the year and a further 30 per cent available between 91 and 180 nights.

Luxury, location and larger travel parties

While elsewhere holiday rentals can attract tourists seeking to save on hotel costs, trends in Abu Dhabi reflect a more luxurious association with short-term rentals. Rather than cutting costs, tourists are seeking larger units to share with family and friends, luxurious locations where they can experience the region’s aspirational lifestyle and proximity to the city’s growing number of attractions.

AirDNA reports that the largest share of active listings are three-bedroom and two-bedroom properties, and the listings are almost exclusively entire homes (94 per cent). These impressive rentals are attracting high daily rates comparable to many hotel rooms – an average of Dh537.50 per night – cementing the market as a desirable and luxurious alternative to hotel stays.

While demand for short-term rentals continues to outpace supply, most locations will perform well as a letting property. Beautiful views will likely score higher premiums, and our own portfolio demonstrates a strong interest in Al Reem Island, Saadiyat and Downtown alike.

Peak season predictions

With an already packed high-season event calendar featuring an exhilarating Formula 1 Grand Prix, four nights of Coldplay concerts and larger-than-life winter festivals – all accessible via the newly opened Abu Dhabi International Airport – I’m enthusiastic that Abu Dhabi’s short-term rental market will continue to see incredible growth this season.

The end of October also marks significant tax changes in the UK, with higher earners soon to be hit by rises in capital gains and inheritance taxes. Henley and Partners, a British firm specialising in citizenship by investment, predicts a total of 9,500 millionaires will have left the UK by the end of 2024, with many looking to the UAE for opportunities in both home ownership and investment.

At Dh70,400 per year, the latest reported average annual revenue for a short-term rental (source: AirDNA) is up 32 per cent year-on-year. For the jet-set looking to protect their wealth, a beautiful part-time property in Abu Dhabi will prove attractive as a luxurious home and a reliable investment.

Ambassadorships and celebrity endorsements

As if the numbers weren’t compelling enough, the A-list of Hollywood and sporting legends have shone a welcome spotlight on Abu Dhabi in recent months. There was 2023’s iconic Mission Impossible blockbuster premiere during which Tom Cruise described the city as “beautiful”, “romantic” and “amazing”. Ryan Reynold’s recent ambassadorship for Yas Island sees more Hollywood royalty line up to sing Abu Dhabi’s praises. Even Shaquille O’Neil couldn’t resist the capital’s charms after this first visit with the NBA in 2022, since which he’s purchased a home in Abu Dhabi and has been quoted applauding its ocean, malls, hotels, desert safaris and local cuisine. “Listen, it’s what we call paradise in the United States,” he said in an interview with Kris Fade on Virgin Radio Dubai.

Between its tax advantages, world-class healthcare and an aspirational lifestyle now more visible than ever, Abu Dhabi’s stock is rising – and so too will that of the property investors quick to join its steadily growing market of short-term rentals.

The writer is the chief executive officer of Frank Porter.