In Dubai, there is often talk of spectacular real estate returns, with agents confidently quoting figures of 12% to 15%. But what does the picture look like when you actually factor in all the costs? An example from Business Bay shows that the real return can be quite different from the sales pitch.
A one-bedroom apartment was purchased there for AED 1,100,000. It is rented out for AED 105,000 per year, which at first glance seems like an excellent deal. But when you add the annual service charges of AED 22,000 and maintenance costs of AED 8,000, the actual income is significantly less. Ultimately, the net yield comes out to around 6.8%. That is by no means bad, especially compared to cities in Europe where 3% to 4% is considered good.
However, it is clear that double-digit returns are the exception rather than the rule.
Realistic expectations are important
What is striking is that many investors focus solely on the rental price without considering the associated expenses. And that is not without risk. In this case, the rental price of AED 105,000 is on the high side. If the market becomes saturated with new projects, that price could drop to, for example, AED 90,000. This would cause the net yield to quickly fall below 6%.
Furthermore, there are other costs that are often overlooked. These include the DLD fee upon purchase, potential void periods, and financing costs. All these factors ultimately impact the return. A net yield averaging between 6% and 7% proves to be a realistic starting point for most apartments in popular areas such as Business Bay or Dubai Marina.
Anyone looking to enter the Dubai property market would do well to look beyond the gross figures. Always ask for the net yield, including all annual and one-off costs. Only then will you get an honest picture of what an investment truly yields.
Edward Clarke is a seasoned property expert with extensive experience in international real estate investment, with a particular focus on Dubai’s fast-growing property market. Drawing on both personal investment experience and years of client advisory work, he helps investors make informed, realistic decisions when purchasing apartments, villas or off-plan developments in Dubai. With a pragmatic mindset, a sharp focus on returns and a strong commitment to transparency, Edward is a trusted point of contact for anyone considering a property investment in Dubai.
