How to make the most of your property during Dubai’s short-term rental real estate boom – An expert guide

One of the primary drivers fuelling the short-term rental frenzy is the promise of higher returns on investment compared to traditional, more stable long-term lease

Properties in areas in Dubai known for affordability, amenities, excellent transport links, and those offering a luxury lifestyle tend to be the most appealing. Image: Shutterstock

As Dubai’s tourism boom continues to drive demand in the real estate market for short-term rentals, many landlords are considering converting their own properties to capitalise on the demand.

Navigating this landscape can be tricky as it requires a strategic approach and gaining a proper understanding of the current UAE regulations and best practices. Here’s what property experts have to say.

Converting your property to short-term rental

One of the primary drivers fuelling the short-term rental frenzy is the promise of higher returns on investment compared to traditional, more stable long-term leases.

“While short-term leases typically generate 20-25 percent more income over a year compared to long-term rentals, based on a minimum of 80 percent occupancy, we are already seeing the annual income from short-term leases lessen due to the higher rental prices being achieved today,” said Louise Heatley, Owner & Managing Director at Exclusive Links Real Estate Brokers.

Traditional annual rent prices have skyrocketed across Dubai, with the highest hikes ranging from 20 to 60 percent, depending on the neighbourhood. This surge in buyer activity across market segments has led to a decrease in available rental supply.

While this situation could work in favour of many landlords, many are choosing to capitalise on the short-term frenzy for higher yields, as pricing can be adjusted more regularly based on the market, unlike long-term contracts that are tied to a fixed rate.

 

Beyond financial incentives, short-term rentals offer investors and landlords a significant advantage: flexibility.

“Short-term rentals allow investors to diversify their income streams by catering to tourism. This helps mitigate risks associated with vacancies or fluctuating demand, and offers opportunities to capitalise on seasonal trends for optimised occupancy rates,” Abdullah Alajaji, Founder and CEO of Driven Properties, said.

He added that unlike long-term leases, owners of short-term rental properties can adjust pricing, availability, and usage based on market conditions and personal preferences, providing agile investment opportunities.

 
Short-term rentals allow investors to diversify their income streams by catering to tourism

Short-term rentals allow investors to diversify their income streams by catering to tourism

The most appealing properties for short-term market

So what type of properties are considered most lucrative for short-term rental conversions in Dubai? The experts point to premium properties in key locations as being the prime targets.

According to Heatley, “properties in areas known for their affordability, amenities, and excellent transport links, as well as those offering a luxury lifestyle, tend to be the most appealing.”

She cited luxury apartments in Dubai Marina, Business Bay, Downtown, and Jumeirah Beach Residences as hot properties, along with entire villas on Palm Jumeirah that are often rented short-term for special occasions.

Alajaji echoed this, saying “Luxury apartments in prime locations such as Downtown Dubai, Dubai Marina, and Palm Jumeirah are top picks for tourists, especially first-time visitors.” He added that large villas with private pools and beachfront properties are favorites among families or groups traveling together seeking a lavish vacation.

Several significant demand drivers are expected to impact Dubai’s short-term rental market in 2024 and beyond. István Juhász, CEO and Co-Founder of Shard, points to “major international events, the continued growth of the tourism sector, and favourable visa policies such as the Golden Visa” as key factors.

He also highlighted “the increasing trend of digital nomadism and remote work” as a potential driver of demand for short-term rental properties in the city.

Alajaji referenced Dubai’s overall appeal as a travel hotspot, stating “if we take the fascinating information that Dubai Mall welcomed an impressive 105 million visitors in 2023, it’s not hard to imagine how this trend will continue in 2024.”

Luxury apartments in prime locations such as Downtown Dubai, Dubai Marina (pictured), and Palm Jumeirah are top picks for tourists, especially first-time visitors

Luxury apartments in prime locations such as Downtown Dubai, Dubai Marina (pictured), and Palm Jumeirah are top picks for tourists, especially first-time visitors

UAE regulations for short-term rentals – All you need to know

It is crucial for prospective buyers and investors to understand and comply with the relevant regulations set forth by authorities. Failure to do so can result in penalties and legal issues.

“Any new buyers considering converting their properties into short-term rentals must be aware of the regulations set by the Department of Tourism and Commerce Marketing,” said Heatley.

The DTCM is the governing body overseeing the short-term rental market and tourism trade in Dubai. Here are some of the key requirements outlined by Heatley:

  • Owners must obtain a permit from the DTCM before marketing and letting their property for short-term rentals.
  • The property must comply with DTCM guidelines, including recent mandates like having keyless access for guests.
  • Owners need to consider financial obligations such as licensing fees, municipality fees, and tourism fees.

She also noted that landlords looking to self-manage can only obtain a maximum of eight permits from the DTCM. “If more are required, the owner would need to apply to be recognized and approved as a professional operator and will need a trade license.”

The experts suggested that while landlords can do it themselves, working through a management company would eliminate the hassle of managing the property and ensure all licensing regulations are being following, giving the landlord more compliance and protection with guests.

“Government approvals through the DTCM is mandatory on all short-term properties in Dubai and one of their requirements is that the ‘host’ needs to be available on call 24/7. As a landlord self-managing your own property, only you can evaluate the time required and return on investment,” said Heatley.

Dubai short-term rentals

Government approvals through the DTCM is mandatory on all short-term properties in Dubai. Image: Shutterstock

“Engaging a professional management company can ensure higher occupancy rates, better guest experiences, and compliance with local regulations,” said Juhász.

He suggested that having a company manage the property is more convenient, especially for owners who are not based in Dubai, as the agency would handle everything from marketing to maintenance.

“They [buyers] should be aware of local regulations, including zoning laws, licensing requirements, and tax obligations. They should also review homeowner association rules, ensure compliance with safety and building codes, and obtain appropriate insurance coverage,” said Alajjaji.

“Establishing guest screening and conduct policies is important for safety and security. Conducting thorough research and seeking professional advice can help ensure legal compliance and success in the short-term rental market,” he added.

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