We are pleased to launch the third edition of the AirDXB Short-Let Market Review Report, focusing on the developments in the Dubai short-let market for Q3 2023.
Q3 is the epicentre of the short-let market’s low season, as tourism numbers decline in the hotter summer months. However, AirDXB were proud to maintain our high occupancy rates across the quarter, averaging at 95%: a staggering 42% higher than market average. The quarter performed well in general, in fact it was the best performing Q3 on record, both in terms of transaction volume and sales value. The Dubai real estate sector is booming and with progressive government initiatives, such as the UAE Tourism Strategy 2031, it is a great time to consider short-let as one of your key investments.
In this report, we take a look at the continued boom in real estate transactions, the areas in Dubai seeing the most transaction activity, how long-term rents are levelling off in prime locations, the decrease of stock in the short-let market by approx. 20%, combined with record-breaking rates for high season: the perfect example of demand outperforming supply and driving up financial returns.
The Top 5 Trends in Short-Let in Q3 2023
The best performing Q3 in terms of both volume and value of real estate transactions since 2014. The confidence in the Dubai real estate market is at an all-time high which can be attributed to economic stability, government initiatives geared towards facilitating investment, robust infrastructure, high quality of life, and the UAE remaining a tax-friendly jurisdiction. Market accessibility is also a factor. We are seeing an increasingly diverse demographic of property investor. 26% of total sales in Q3 2023 where in the price range of AED1m – 2m which aligns with the on-going trend of apartment sales outperforming villa sales. Many of these transactions involved first-time/one-time property investors, as residents and overseas buyers become increasingly aware of the investment opportunities in the UAE, including the lucrative short-let market, which is seen as a stable and low-risk market in comparison to other global financial hubs.
The shift towards Al Khail Road: a new dominating market. Traditionally popular areas such as Downtown Dubai and Palm Jumeirah no longer dominate real estate transactions, as the high-end investor market settles and the mid-level investor market spurs activity. We are seeing buyers seek value and deals, which can be found in lower-cost areas such as JVC, Business Bay and JLT. In Q3, we saw the emergence of new and upcoming areas such as Al Merkadh (off-plan) and Arjan on the leaderboard which further demonstrates the appetite for value for money. This is great for those looking to short-let their property in these areas, as the lower sale price could provide a greater yield on financial returns.
The impact of the UAE Tourism Strategy 2031 on the short-let market. Launched in November 2022, the proposed strategy will strengthen the position of the UAE as one of the best destinations in the world for tourism, boosting overnight visitors to 40 million by 2031 and attracting AED100 billion in additional tourism-related investments, potentially including commercial gaming (the establishment of The General Commercial Gaming Regulatory Authority (GCGRA) was announced in Q3) which would bring an entirely new type of tourist to the Emirates. Given the long-term and short-let markets target completely different audiences (residents v tourists), we forsee the percentage difference in comparable financial returns will increase by up to 80% in favour of short-let.
Record-breaking rates on short-let. Q3 is the low season for short-let meaning that ADRs often (and did this year) fall below the annual average. However, Q3 is also the time when we get an indication of how high season (starting in Q4) will perform as guests start to book for future months. As of printing, 10% of AirDXB’s portfolio are achieving their highest rates since listing with us, and this percentage is increasing on a daily basis. December 2023 is looking particularly strong as COP28 bookings have secured maximum occupancy rates and ADRs, and the festive season (peak time for short-let) is performing as strong as it ever.
Long-term rental market cooling. Similar to the transactional market, long-term rents are levelling off in traditionally popular areas as renters, just like buyers, begin to move further out to secure better deals. The Dubai Land Department states that the average rent in Q3 was AED68,000 but of course, there are areas where this is significantly higher (eg Palm Jumeirah average rent is AED256,785). A report by CBRE issued in August 2023 stated that areas such as Mudon (5%), Deira (4.8%) and Remraan (4.6%) are seeing the highest percentage increase in rent on a MoM basis (figures from July 2023), showing that the high spikes in rental returns for landlords, in central locations, have cooled.