Why Dubai is the Ideal Destination for Investing in Serviced Apartments
For those with money to burn, real estate has been a traditionally attractive proposition. Offering lucrative returns and a stability provided by few other investment options, it has been historically popular and unerringly rewarding, which is why so many people consider it an ideal choice.
Despite the tried and tested formula of traditional property investments, however, many are now turning to serviced apartments as a promising alternative. This strategy is slowly gaining traction across the globe and can be particularly profitable in locales like Dubai.
Boasting high to full occupancy rates in most major cities, serviced apartments are thriving on the back of growing business travel and tourism, especially in the most exclusive areas, where visitors have money to spend and luxury is the order of the day.
Yet the one obstacle that deters many who may consider this investment option is a lack of information on the topic. If you’re in search of clarity, we can deliver it here.
What are serviced apartments?
The idea of serviced apartments is a simple one. Created to provide a convenient and cost-effective mode of accommodation for leisure and business travellers aiming to enjoy an extended stay, they provide apartment-style living with all of the benefits of the most exclusive hotels.
The difference between these properties and more traditional options is that they aim to create the sense of a ‘home away from home’, but with the added benefits of facilities like restaurants, bars, and laundry services.
Fully-furnished, they provide a private and comfortable place to stay, with the advantage of the entertainment and luxurious settings extended by top hotels. Most have a wide range of rental options to choose from, varying from studio apartments to one- and two-bedroom units.
Why are they worth investing in?
Serviced apartments have a number of benefits that set them apart from more traditional alternatives, and these can significantly lower the costs associated with being a landlord. These include numerous taxation benefits, as well as increased stability, which can make them a very good addition to your portfolio.
As a result, a study of UK companies found that there had been an 86 percent increase in their growth, with a further uplift expected in most major cities in the near future. This can make them a highly lucrative proposition.
One key benefit to be aware of is their reliability with regards to the profits they deliver. Cash flow is guaranteed, because where you purchase a serviced apartment, you’re entering into a long-term lease with a management company rather than any individual tenants. This means that you’re getting an agreed rental rate for the duration of the agreement, ensuring regular and reliable capital.
Long-term leases have the added boon of eradicating vacancy worries. It is the job of the management company to take care of filling rooms, and whether they achieve this or not, you are still guaranteed your rent, increasing the security of your investment.
Furthermore, maintenance is taken care of by another party. Daily room cleaning, repairs, and accidental damage are all the responsibility of the person leasing the property from you, leaving you with only more serious issues within the realm of your concern. Even these will largely by handled by the tenant, so that all you need to do is provide the capital to cover them, making the investment entirely hassle-free.
Perhaps the most attractive advantage of investing in a serviced apartment rather than traditional property is that the fees and charges will all be lower, as well as made clear upfront. Many of your normal landlord outgoings will be covered by the tenants, and there will be no management or letting fees, helping to ensure a higher return. You will also know exactly how much you need to pay and when so that your outgoings are certain and you can build a clear business budget into your plans.
Should you require any further incentive to convince you of how attractive a proposition this is, remember that due diligence will have been performed for you too. The likelihood is that expert researchers will have selected the location based on factors assuring its suitability, such as appropriate infrastructure, strong socio-economic development, and an ideal demographic profile. This will all be outlined for you so that you can make a straightforward, informed decision as to whether it’s the right investment option for you.
The strength and breadth of such arguments is compelling and means that those looking to add to their property portfolio ought to seriously consider serviced apartments as a potential choice for their next investment.
Why is Dubai an ideal place to invest?
We have explored why serviced apartments can be a wise investment choice, but why serviced apartments in Dubai specifically? The answer is manifold and means examining the attractiveness of the city’s property market in its entirety.
Firstly, start by taking into account the city’s consistently growing economy. Whenever you plan to invest your money in real estate, especially overseas, this is one of the first factors to consider. If economic growth has been strong, then it’s likely to be a safe region to invest in. Dubai is going from strength to strength, coming out foremost for planning and economic growth within the MENA region as a whole, as well as being the fifth fastest growing economy in the world. This makes it an ideal investment prospect.
What’s more, property in Dubai has the benefit of an attractively low acquisition cost. Compared with most other real estate capitals in the world, prices are incredibly competitive; the same property in London would cost almost seven times more on average. For many, this places it far ahead in the investment stakes.
Despite the economy of its prices, Dubai's rental returns are exceptional and much higher than those of most other major real estate capitals. In the best performing areas of the city, landlords see an average 10 percent yield. To put this into perspective, compare this figure to those of other investment options: in New York, the average rental yield is 3.91 percent; in London, it’s 3.21 percent, and in Singapore and Hong Kong the percentages are 2.83 and 2.82 percent respectively. Even in the most conservative areas, you can still expect to see returns of between 7 and 8 percent, making Dubai one of the best destinations in the world for property investors looking for profits.
You may also be pleased to learn that Dubai offers strong capital appreciation, with data indicating that those who invested in 2006 paid an average of AED 763 per square foot. Today, those same properties are selling for AED 1,609 per square foot, which represents an overall capital appreciation of 111 percent.
Lastly, landlords in Dubai have the added boon of not having to pay property tax. This means that after you have purchased your investment and paid a registration fee, no other government tax can be levied against your property. This massively boosts your overall rental yield, for the same buildings in Hong Kong would be charged 15 per cent annum, 13 per cent in Singapore, 2.33 percent in London, and 2.2 percent in New York.
For those looking to make their next property investment, there are many compelling reasons for considering serviced apartments in Dubai. We have outlined these above for you, and combined, they create an argument that is hard to ignore.
Contact us today if you’d like to learn more about Dubai property and how to invest in it.