Given the seasonality characterising the hospitality sector, the holiday homes market in Dubai usually experiences a dip in demand over the course of the summer months. However, this time is different. The influx of families is driving up demand. As a result, the number of holiday homes in Dubai is on the rise.
This may seem surprising considering the havoc wreaked by the pandemic, the ensuing restrictions in travel and the slowdown in the global economy. But if you think about it, the importance of sanitisation and social distancing calls for more spacious living areas, making holiday homes more attractive as compared to hotel rooms.
Short-term rentals in holiday homes means minimal interaction with hotel staff, bigger spaces at competitive rates, and access to additional amenities such as fully equipped kitchens.
More often than not, families require larger units that are more likely to be found on the holiday homes market. Traditional hotels usually cannot accommodate large families or multiple households at the same price range. Moreover, tenants are somehow avoiding long-term rent given the uncertainty of their places of residence.
The gig economy has also made the holiday homes market more attractive. People today favour flexibility, and they may want to be in Dubai for a few months, then move to another city whenever they want without committing to long-term rentals. Furthermore, holiday homes are easier to rent, involving less paperwork and no residence visa requirements.
World-class amenities in residences
The attractiveness of holiday homes is partly due to the widespread availability of world-class amenities in residential buildings across Dubai. What sets Dubai apart from other global holiday destinations is the availability of family-friendly and properly-equipped properties on the holiday homes market.
Kitchens, internet connections, washing machines, gyms and swimming pools are commonplace across most buildings in Dubai, making the holiday market sector attractive to families
and individuals.
Qatar 2022
With the FIFA World Cup around the corner in Qatar, Dubai is expected to welcome more than a million visitors. Dubai and Qatar are an hour flight apart. Therefore, a large number of people will be visiting the emirate pre, during or post the World Cup. All this will require a larger number of holiday homes.
In addition, China may reopen its borders after the Winter Olympics, further boosting the UAE’s tourism and hospitality sector.
Higher returns for investors
Many investors opt for holiday homes since they generate up to 60 percent more in rental yields compared to long-term rent. Many developers also offer property management and leasing services, making the short-term rental experience hassle-free for investors.
We are witnessing a growing investor appetite to achieve higher returns from the short-term rental market. Over the past two years, we have seen a spike in rental rates for holiday homes.
Prime areas and waterfront properties such as the Palm Jumeirah and Dubai Marina have seen an increase of over 50 percent post-pandemic.
Other areas have seen an increase of 10 to 20 percent, and although they may not be as attractive, most areas across Dubai still outperform long-term rentals.
Portfolio diversification
It is no secret that investors always strive to diversify their investment portfolios appropriately. And it is not about choosing to invest in one market or asset class versus another. It is more about looking for an optimal combination of investments to maximise returns.
Holiday homes represent a great way to diversify an investment portfolio. The investment risk here is the risk of vacancy, which can be mitigated by choosing popular areas with limited supply, easy access to malls, business centres, and leisure and hospitality facilities. For those not living in Dubai permanently, a holiday home is also a place they can use whenever they want. This personal usability aspect of holiday homes reduces the vacancy risk.
Investment for life
The purchase of a holiday home could be your starting point towards a retirement plan. Property investments, especially in the form of holiday homes, are one of the most successful, low-risk paths one may take towards retirement. Whether you consider selling your home later or continuing to benefit from rental yields, holiday homes appreciate over time.
On the long term, it is very likely for home prices to go up. Although property prices have been rising, investing in a holiday home is still considered one of the most successful ways of investing in your future. This means that by the time you retire, the value of your holiday homes will have potentially increased drastically to contribute to your retirement goals.
Easing regulations
In 2013, Decree No 41 was issued to regulate the activity of leasing out holiday homes in the Emirate of Dubai. The decree propelled the growth of the holiday home sector, offering a unique opportunity to generate yields from short-term rentals. In 2016, the regulations were eased, allowing individuals like homeowners to rent out their residential properties.