This is a follow-up article on last week's post on three phenomenal Dubai property investments.
In today's report, we are covering the opposite - some of the poorest-performing Dubai real estate investments in recent years, both in terms of capital appreciation and rental returns.
Dubai’s property market is not only volatile, it is also incredibly complex. Properties in different neighborhoods can have vastly different returns, both in terms of rental yields and capital appreciation. Even buildings located right next to each in the same neighborhood may offer investors very different returns.
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Without further ado, here are three examples of underperforming property investments in Dubai.
Burj Khalifa - A world-famous building with underperforming returns
Burj Khalifa, the tallest building in the world, offers a range of apartments from studios to 4-bedroom penthouses.
Back in 2010, you could buy a studio apartment here for as little as 1.2mill AED directly from the property developer Emaar Properties.
Despite Dubai's strong property market as of 2023, the same studio apartment in Burj Khalifa only sells for around 1.35mill AED, resulting in an annual capital appreciation return of just 1.2%, or 16.7% over 13 years.
Rental returns look better, with studios renting out for 100K AED per year. However, due to the very high service charges for the building, the net rental return hovers just above 4%.
Even more importantly, we should note that studio rents in Burj Khalifa were only around 70K up until 2019, which earned investors a meager rental yield of just 2.5%.
Cayan Tower - An iconic skyscraper with limited returns
Cayan Tower, formerly known as Infinity Tower, is one of Dubai Marina's most distinctive residential addresses.
When the building was completed in 2013, it was the world's tallest tower with a twist of at least 90 degrees. This record has since been surpassed by China's Shanghai Tower.
Launched as an off-plan project, a 2 bedroom apartment in the tower was sold for around 2.7mill AED back in 2007 directly by the developer. The same apartment, 14 years later sells for an almost identical amount. With a price increase of just 1.4% over 14 years, or 0.1% per year, investors lost out on promised price increases.
The same 2-bedroom apartment is rented out for 160,000AED per year, resulting in a gross return of 6% and a net return of 4.3%.
And these are good returns when compared to the rental yields achieved just a few years ago.
Before the post-covid explosion in Dubai apartment rents, the same 2-bedroom apartment earned a net yield of just around 3%.
We cover in detail why some properties underperform and others overperform in our Dubai Property Strategies coaching. Check out our property consulting services or sign up for a free consultation.
Mulberry - One of Dubai Hills Estate's First Residential Buildings
Dubai Hills Estate is a master planned residential neighborhood in the center of Dubai.
Developed by Emaar Properties, Dubai Hills Estate features a sprawling golf course, a vast central park, and the newly opened Dubai Hills Mall with more than 700 stores.
Back in 2015, Emaar launched the first residential buildings in the district. You could buy a one-bedroom off-plan apartment in the Mulberry apartment buildings right on the park for approximately 1.3mill AED.
The same apartment now rents out for AED 90K per year, resulting in a 6.9% gross return and 4.8% net return.
Property prices, however, have virtually stayed the same, with 1 bedroom apartments selling for the same prices today as back in 2015.
If you are looking to buy real estate in Dubai and are unsure how to identify good investments, you have come to the right place.
Here at the Dubai Navigator, we provide 100% independent advice on how to identify good investments before you buy, how to negotiate a better purchase price, how to maximize your rental returns, and how to sell your property at a premium.
We use complex cash flow analysis and both historical and upcoming construction data to assess predict property market trends.
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