October 10th 2019Real Estate News

Holiday homes in hot demand

Private developers in Dubai and small investors are increasingly resorting to holiday homes, which offer substantially higher returns as compared to long-term rentals, say industry executives.

They said that the average rental return in Dubai is around 7-8 per cent, while holiday homes offer up to 25 per cent more returns to investors, as they are the hottest growing segment in the emirate. In addition, developers and investors can use their properties for short-term rentals, while also making it available for sale.

“Instead of making traditionally 7-8 per cent in rentals, people are now making 15-16 per cent through short-term rentals or holiday homes. During three months from November 2019 to January 2020, holiday home operators earn 70 per cent more than they earn on annual rental income; so, this segment is growing in a big way,” said Imran Farooq, CEO of Samana Group.

“For holiday homes, people are moving towards studios because 95 per cent of tourists opt for studios. This is the reason studios are extremely in demand. Gone were the days when people were sitting with an inventory of 200 units. Now people are managing three to five units and this classification is increasing as they are opting for short-term rentals and holiday homes,” he said.

Samana Group has established a subsidiary that will cater to holiday homes. Similarly, Emaar Properties recently launched a new short-term rental concept for holiday homes called Ease by Emaar to cash in on this growing segment.

A recent report by Knight Frank said that the holiday home market of Dubai accounts for two per cent of its total households, which is the highest proportion of all other key global hub cities. In Dubai’s holiday home market, there were currently 10,766 active listings out of a total of 20,395 properties which have been registered on the Airbnb platform since 2010.

The total number of listings has increased substantially in recent years, with total active listings recording a growth rate of 161 per cent since 2016. Of the 10,766 active listings in 2018, 61 per cent were entire homes or apartments, 31 per cent were private rooms and the remaining eight per cent were shared rooms.

“Developers are running out of studios. The question then is why don’t developers just build all studio units. This because the regulations of the emirate demand one parking for each unit; so, when you build a 400sqm studio, you are building as much non-saleable area as saleable area – it is a freebie. This is why all the developers are doing exceptionally well for studios,” he said.

He also revealed that more and more holiday home business operators are moving towards the B area, where they could offer their clients as low as Dh140-150 per night or a weekly package of Dh999.

Pranav Mehta, country head for Oyo UAE, says that Dubai presents a unique opportunity for holiday homeowners and operators as around 20 million people are expected during Expo 2020.

“Investors in Dubai with multiple properties do seem to favour holiday homes rather than long-term renting to benefit from the tourist-friendly nature of the emirate. We aim to tap into this burgeoning short-term rental market with plans to introduce the category to other emirates in the UAE in the coming months,” Mehta said.

Firas Al Msaddi, CEO of Fam Properties, said that holiday homes located at a walking distance to landmarks like the Burj Khalifa, Dubai Mall, and near to the beaches work very well.

“In today’s market, you can generate 10 to 25 per cent higher income on short-term rentals as compared to the long-term rent. But, the landlord puts their property on holiday homes due to occupancy. With holiday homes, you can rent for a day or a week but the property will still remain sell-able at any time. You are not committed to a long-term rent and at the same time, it is still doable to be rented yearly, when you have the right tenant at the right price,” he said.

For developers, it is heaven in terms of where the market is today, because holiday homes will allow them to stage their properties, furnish them, generate some income out of it to cover service charges and other expenses, and make some money out of it at the same time, said Al Msaddi, who is also the CEO of Fam Living, a holiday homes company.

He, however, warned that there are a lot of misleading advertisements pushed by holiday home companies, promoting the idea that with holiday homes you can generate 50-100 per cent more income, which is completely wrong.

“You cannot generate 100 per cent more rent because you got holiday homes. I have not seen an example where it is able to generate more than 25 per cent, but it gives you better occupancy, flexibility to sell, flexibility to rent on long-term rent, gives you the advantage of having a very well-maintained unit, of having a staged unit for new buyers to come and look at the unit if you want to sell,” he concluded.

Collected and published by propertyeportal.com editorial team. Get in touch with us at [email protected].