Short-term rentals are emerging as a major second income for UAE residents as they are high in demand and offer much higher returns. Industry executives say that many first-time property owners are listing their properties for short-term rentals to earn a second income.
Similar to other sectors, the short-term rental market also took a hit during the coronavirus pandemic in 2020 but recovered sharply on the back of ‘revenge travel’ witnessed after Covid-19.
Anna Skigin, founder and CEO of Frank Porter, an Airbnb Management Services company, said short-term rental has emerged as a major alternative income source for UAE nationals and expat property owners.
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She added that short-term lets are lucrative and flexible – allowing owners complete freedom of their assets. “The short-term rental market provides on average 20 per cent higher returns than long-term – over a two to five-year basis,” Skigin told Khaleej Times in an interview.
“We are seeing property owners entering the Dubai real estate market for the first time and right away converting the units to short-term rentals. We are also seeing some of our clients sell their units to new buyers. It has become part of the selling point of a property,” said Skigin, a Russian and Canadian national.
Skigin added that short-term rentals always generate income. “We have this consistently with the majority of our owners who have been with us for over 2-3 years.”
Interestingly, many property buyers in the UAE, especially Dubai, who bought properties in the local market have listed their assets for short-term rentals on various online platforms to earn a second time to cash in on the rise in rentals.
In addition, industry insiders say that growing tourist numbers in Dubai and the UAE are also supporting the short-term rental market.
According to the latest figures released by Dubai’s Department of Economy and Tourism (DET), the emirate received more tourists than ever before in 2023, attracting 17.15 million international overnight visitors as compared to 14.36 million in the previous year, a massive growth of 19.4 per cent.
The numbers also surpassed the previous record of 16.73 million registered in 2019.
Top areas for highest returns
Skigin said that the highest-density areas are Dubai Marina, Jumeirah Beach Residence (JBR), Palm Jumeirah and Downtown. “These areas provide the highest rate per night. However, it doesn’t always mean these make the best returns because the property values are also high. Some of the highest returns (RoIs) are also in areas like Jumeirah Lake Towers (JLT), Jumeirah Village Circle (JVC) and soon to be Maydan.”
Laura Adams, sales director at Provident Real Estate, said the Dubai rental market recorded 205,346 new contracts and 293,624 renewals in 2023, with a notable rent increase across Dubai. This is attributed to the pandemic recovery and a strategic shift towards short-term leasing for higher returns.
“Rents in Dubai have been rising, attributed to several key factors. Initially, there was a drop in rent prices during the pandemic, but as the situation has stabilised, demand has surged. A significant number of investors, particularly those owning apartments, are shifting towards short-term leasing. This strategy is aimed at achieving a higher return on investment (RoI),” said Adams.
In the past three years, rents have been consistently going up, rising at a double-digit rate. Similarly, property transactions also reached a record high, pushing property prices to an all-time high.
2024 looks better than 2023
Frank Porter founder added that the short-term rental market did well in 2023. “We have seen it return post-Covid-19 with more and more people travelling. In terms of 2024, it is still early, but our January and February numbers are already above 2023 by about 15 per cent. So we are anticipating this to continue. Travel is fully back and it’s being reflected in the numbers,” Skigin said.
Highlighting new trends, she added that the other emirates of the UAE have also entered the market and are growing rapidly, such as Abu Dhabi and Ras Al Khaimah. “We are seeing a lot of interest in these areas.”
She elaborated that longer stays continue with people’ working from’ their holiday rental.
She added that initiatives such as the single GCC tourist visa, which is expected to be rolled out in the near future, are a positive change for the market.