Offering short stay rental options is creating opportunities to better manage supply of new properties in the UAE, with Ajman becoming the latest emirate to issue rules to develop the holiday homes concept. This went into effect May 1.
Sharjah too in the recent past issued regulations on holiday homes, while at the same time protecting the rights of consumers who use them. Dubai’s holiday homes keep surfing high demand, with the recent Eid holidays easily adding up to more than 90 per cent occupancy levels. In Abu Dhabi, a base is getting built that offers visitors something other than hotel rooms and serviced apartments attached to them.
What all this does is offer landlords options beyond that standard one-year rental lease. Sources say short-term leasing will allow the various emirates better manage new property supply in line with demand. What the authorities don’t want to see is plenty of new homes left unoccupied for long stretches depending on whether there is sufficient demand for one-year rentals.
With short-term, landlords can make suitable changes as and when they see fit. And, hopefully, bring more stability on rental fluctuations.
The short-term prospects for short-stay leasing in the UAE is likely to remain at elevated levels. “All that landlords will need to keep checking is inbound travel numbers,” said the head of a property management company specializing in holiday homes. “There is so much that Sharjah or Ajman can do with short stays, particularly with those coming into the country for extended holidays.
“Any property near to the beaches stands a good chance for frequent letting.”
Sharjah’s been working on its hospitality sector by creating new destinations or giving makeovers to heritage sites. These have proved popular with tourists – especially Gulf and Middle East visitors – seeking experiences slightly different to what they would expect here. Which would require more hotel room stocks – or until then, make sure enough of short-stay options.
Ajman’s pipeline of new homes has been busy through recent months, while the emirate has simultaneously focussed on building up its tourist destinations and experiences. Now, by allowing holiday home rentals, the emirate seeks to make gains from both.
“The short-let model is seasonal and runs over a 12 monthly cycle. Low season will naturally see a drop in prices (up to 50%) as temperatures soar to over 40 degrees, which naturally influences tourism. However, high season rates level out the returns, meaning the overall annual returns for short-let still exceed the long-term lease model.
Couple this with retaining control over your asset, having the ability without the stresses of landlord/tenant obligations, it makes for a great option.”
In Dubai, landlords are spoilt for choice on what they should be doing with their properties. Stick with a 1-year lease and they get to access a market where key locations have seen rent gains for 20-30 per cent.
If they think short-stays are where they want to be, this space is giving them equally solid returns. It’s all showing in the numbers.
“Towards the end of 2022, as long-term rents increased in Dubai, the volume of new stock arriving on to the short-let market slowed considerably as homeowners chased the inflated prices in long-term,” says a report by AirDXB Group.
“This trend has continued into Q1-2023 with 1,238 new listings across 3 months, showing a minor 5 per cent quarterly growth in the short-let market. This is great for current homeowners in the short-let market, as less supply drives further demand, resulting in higher ADR and higher occupancy rates, meaning higher returns overall for short-let homeowners.”