Dubai: Having a problem renting on 12-month tenancies? Then put that property into short-term rentals as a solution. More of Dubai’s landlords are starting to do so.
Currently, Dubai’s “holiday home” market accounts for 2 per cent of the city’s total number of households - which is the “highest proportion of all other key global hub cities”, according to a new report by Knight Frank.
The ratio of Airbnb listings to total number of homes in Paris is 0.8 per cent, and 1.2 per cent in New York.
Those numbers for Dubai are only going to get higher, as more homes become ready for occupation.
In the current market for longer term rentals, landlords are finding that they have to drastically cut their rent demands if they are to find a tenant. Not doing so puts them at risk of leaving the property unoccupied for months on end… and with no guarantee that they would still get what they ask.
So, short-term rentals are proving to be an option to get some sort of returns coming in. This is showing up in the numbers.
On the Airbnb platform, there were 10,766 “active listings” of Dubai homes last year, of which 61 per cent were entire homes or apartments. (Local laws require an entire property to be listed and not individual rooms or shared accommodation, both of which are liable for heavy penalties.)
Of the listed properties, 61 per cent were one-bedrooms and 17 per cent two-beds, and 13 per cent studios.
“Easing of regulations in April 2016 opened the market further, which allowed homeowners to rent residential homes on a short term, straightforward and low cost basis,” the Knight Frank report states. (Since 2016, the number of short stay listings have shot up by 161 per cent.)
And it’s not just Airbnb riding the waves — Dubai based bnbme has been creating opportunities at the luxury end of short-term rentals, with rates pegged at thousands of dollars a day.
India’s OYO recently extended its reach into Dubai with Oyo Home.
The latter has a current portfolio of 40 homes in Dubai, and with plans to extend that to the other emirates.
According to Vartika Goel, Country Head - UAE, Oyo Hotels: “There is significant market opportunity especially as people have invested in second homes in top holiday destinations across the UAE. Gulf and international travellers today are open to choosing the comforts of a fully managed holiday home for short-stays.
“Homeowners in Dubai have opened up their homes to this opportunity.” (Average stays at these homes are two to three days.)
So, where are these holiday homes showing up in Dubai? The Dubai Marina and Downtown are obvious choices, given their status as favoured spots for investors picking up residential assets and then leasing them out. Same with the Palm, Jumeirah Beach Residence and at DIFC, according to Knight Frank.
“As of 2018, these sub-markets have a far higher density of holiday home units compared to 2016, and we have now started to see short-term rental accommodation appearing in new districts east of Shaikh Zayed Road and in the more historic parts of Dubai north of Za’abeel Park,” the report finds.
But landlords take note - demand and the rates they can generate will depend on the location of their property.
According to Ali Manzoor, Partner for Hospitality & Leisure at Knight Frank, “As is now generally accepted, holiday homes have had a discernible impact on the hospitality market. However these affects are not felt universally within Dubai.”
But short stay homes come with certain in-built advantages in Dubai, more so with the recently built. These accommodations offer features that they would have found only in hotels in cities elsewhere.
“One of the major appeals of short-term rentals in relation to hotels specific to Dubai is the widespread availability of ancillary amenities such as swimming pools and gyms in residential buildings,” the report adds. “Unlike other cities where such amenities are not commonplace in residential buildings, their widespread availability narrows the gap in product offering between the two product types (hotels and offering short-stay residences).
How short stay rates stack up against Dubai’s hotel tariffs
Landlords are able to generate solid returns from putting up their homes in the short stay/holiday home market.
“When comparing achievable rates between Dubai’s holiday homes and hotels we continue to witness the holiday home market outperform the hotel market
by 64 per cent year-to-date June 2018,” the Knight Frank report finds. “Some of the variation can be explained by the fact that the holiday home supply is still very much skewed towards Dubai’s upmarket areas such as Dubai Marina, JBR, the Palm Jumeirah and Downtown Dubai.
“In contrast, Dubai’s hotels are spread across the city, with secondary locations forming the vast majority of hotel supply in the market in aggregate. We will continue to see this premium achieved in the holiday home market; however as we continue to see residential development in secondary locations we expect that this premium is likely to start to reduce on average.”