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Dubai: New property owners are converting their units to short-term rentals; here’s why

The potential of short-term rentals has become a key selling point of many properties

Dubai has seen a large upsurge in Airbnb listings over the last three years. There are currently between 25,000–30,000 listings in the city, with significant growth in 2024 compared to the previous year. This boom looks set to continue over the coming years, providing a great opportunity for investors, but there are certain considerations to make before you dive in.

Since a legal framework was introduced in the region and short-term lets have been fully regulated since 2016, the Airbnb market has emerged as a lucrative alternative income source for UAE nationals and expat property owners.

We have seen a trend of property owners entering the Dubai real estate market for the first time and immediately converting their units to short-term rentals. We are also seeing some of our clients sell off their assets to new buyers in the market who then continue short-letting their new properties with us.

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Villas versus apartments

The potential of short-term rentals has become a key selling point of many properties and is increasingly involved in conversations between buyers and real estate agents. I often get asked what is more profitable when it comes to short-term rental and investment opportunities: villas or apartments? The answer is, there is a huge appetite for both. Whether it is a family who wants the privacy of a villa or a couple of friends wanting to experience Dubai’s city life – we are seeing a multitude of different demographics coming into the city.

Short-term versus long-term

Short-term lets give owners complete freedom over their assets. It’s a dynamic business which ensures landlords don’t get tied into long rental contracts and can adapt their strategy to suit their needs at any given time. The short-term rental market provides on average 20 per cent higher returns than long-term - over a two to five-year basis.

What to know before you invest

There is no doubt that the opportunity in Dubai is huge right now. 2023 was a record-breaking year for tourism with the number of international tourists growing by 19% YoY. This year has also got off to an extremely promising start. According to a recent report by the Dubai Department of Economy and Tourism (DET), the city welcomed more than 5 million overnight visitors from January to March 2024, an increase of 11% on the same period in 2023. Dubai also recently announced that it will create a new passenger terminal at Dubai World Central (DWC) which will bring investment and more tourists into the area.

However, it is important for investors to know the market very well before they enter it. For example, areas such as Dubai Marina, Jumeirah Beach Residence, Palm Jumeirah and Downtown provide the highest rate per night, but because the property values are also high, they don’t always make the best returns. Some of the highest returns on investment currently are also in areas like Jumeirah Lake Towers (JLT) and Jumeirah Village Circle (JVC). Those great deals are harder to come by now (as prices have risen), but they are still there for those willing to make the effort.

Previously associated only with the wealthy and those in search of a luxurious break, Dubai is now catering to all budgets and preferences, which is great for the short-term rental market as we offer a more diverse set of listings. We manage more than 700 properties and see healthy occupancy across all our different locations.

In terms of what to look out for, new trends include people renting for longer periods and choosing to work from their holiday rental, as well as groups of friends wanting to rent larger units. There is a lot of development happening in Barsha South, Meydan and Dubai Creek - amongst other places and these will be very interesting areas to watch this year.

With all of this in mind, my advice for an investor is to consider what their objectives are and which market they are looking to target, as this will have a huge impact on the success of their property. Do your research, get the right advice and be very clear on your plan.

(Anna Skigin is chief executive officer of Frank Porter)

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