Dubai: Sales and rental values remain under pressure, but yields on Dubai’s real estate assets are inching upward.
“Yields have followed a predictable trajectory — compressing as the market peaked in mid-2014 and then expanding as the market reassessed the various economic and financial risks,” states the latest Phidar Advisory update.
“As rents erode and yields expand, so does the downside risk on sale prices for apartments.
“As capital becomes more scarce and risks are reassessed, the yield requirement should expand. Apartments are a preferred asset for yield-seeking investors because yields are higher and void periods are lower.”
But yields on villas are still caught in a tight lock. They did improve last year but have since dropped to 2014 levels.
“Since the peak in mid-2014, rent decline for villas was more than twice that of apartments,” says Phidar. “This is because larger, more expensive units now have longer void periods due to affordability constraints.
“As the reality of a prolonged downturn sets in, the single-family home (villa) yield expectation should adjust and start to gradually increase in the coming year.”
