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Why Short-Term Rentals are a Win-Win for landlords in Dubai

Posted by אביבית אסולין on 17/10/2020
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Landlords in Dubai are increasingly considering short-term rentals. This helps them reduce void periods on their properties as well as achieve higher overall returns. They can also do away with the hassle of one-year tenancy contracts and instead sign on tenants even for a few days.

This is also good news for the wider property market as it can help absorb new supply being handed over by developers. Businesses are sprouting up across the UAE catering to the short-term rental market.

“There is huge growth in short-term rentals all over Dubai. The earning potential is between 25 to 40 percent above the long-term let and sometimes even more due to the low property prices. Further to this, there is great flexibility in short-term letting for the landlords – no long-term tenants to evict and ability to use your property when you want,” says Anna Skigin, founder of Frank Porter, a property management company.

“In the UAE, we are currently at an early adopter stage for short-term rentals. In 5 years, the majority will rent short-term. The financials make a lot more sense as does the flexibility and sustainability of the property,” observes Vinayak Mahtani, CEO of a holiday home management company.

Demand for short-term rentals come from both leisure tourists as well as the corporate traveler. It depends on the season, price, and location of the property.

“We have properties which are occupied by first-time visitors looking for a job, families getting ready to leave to holidaymakers and even celebrities. We had film stars, as well as famous footballers, stay at our properties,” adds Mahtani.

Average rates

The daily rates range from Dh250 to Dh300 for a studio to Dh4,000 for larger villas. The highest-earning areas are Dubai Marina, Jumeirah Beach Residence, and Downtown Dubai. However, other areas are beginning to catch up.

The short-term rental yields for villas are higher. This is because they operate in a space that hotels for the most part do not. So, popular spots on the beach that have villas have done better with short-term lets, outperforming the longer-term rental yields by 2 to 3 percent, say, industry commentators.

Benefits that accrue from short-term letting are a function of location as well as rates.

With the ‘Airbnb’ effect now commonplace, the prime tourist spots are the ones that attract the most interest and occupancy but it is worth keeping in mind that these locations are also competing with hotels in an increasingly competitive framework. This makes the end result largely depend on the type of tenant one is looking at as well as the rates that are on offer. For the corporate traveler, location becomes more paramount but this need not be the primary hotspot that is so critical to the tourist market. Dubai offers a plethora of choices and for the most part, various markets are served from the price-conscious traveler to the luxury tourist.

Investment

Property owners need to furnish the property to an acceptable level before being let out short-term. Also, every apartment needs to have working Dewa, chiller, and working Internet.

The services that are offered are a function of the market that is being targeted.

Airbnb and short-term rentals are much less expensive than hotels and offer more space and a ‘home-like’ environment that appeals to modern travelers.

The tourist market is great for prime areas, but we also see a huge demand for monthly lets across the UAE on dubizzle, particularly from those who have just moved to the UAE, temporary visiting staff from other markets, and people who do not want to commit to long term rentals.

A short-term rental option provides tenants with more flexibility, more options, and less hassle. It doesn’t incur extra charges in the form of furniture or monthly utility charges and eliminates the need to share post-dated cheques with the landlord.

As for the landlord, the absence of a long-term contract gives them more flexibility to utilize the property for guests and makes the asset more liquid so it can be sold with no tenant-strings attached. If fully registered and adhering to the legislation outlined by the regulatory body in the given emirate where the property sits, landlords potentially have a lot to gain from putting their property up for short-term rentals – whether from holidaymakers, professionals visiting the UAE, or tenants who simply don’t want to commit to a long-term rental contract. The demand for temporary accommodation is on the rise making the short-term rental market an attractive option for landlords and homeowners.

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