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Serviced apartments the best investment: find out why

30.04.2017

The growth of tourism and the population in Dubai will lead to demand for accommodation outpacing supply.

Investments in Dubai residential real estate sector stay popular among investors, but recently, along with the expansion of tourism sector, both property buyers and real estate developers are showing increasing interest in hotel apartments.

Last year, Dubai welcomed 14.9 million of tourists, while the occupancy rate was approximately 78%. And this ratio in coming years is likely to change in favor of tourists, for there’s still quite a gap between a demand and the number of hospitality units being delivered, said Niall MacLoughlin, senior vice president of Damac Properties.

Even population growth statistics (5% per year) confirm the fact that demand is significantly ahead of supply. At the moment, freehold residential stock in Dubai includes about 500,000 units. This means that by 2021, at least 20,000-25,000 housing units have to be handed over each year, assuming that population will be up to 3.3 million by this time, and 5.2 million by 2030.

And in serviced apartments sector, there is a similar trend. “The current supply of hotel apartments in the deluxe category stands at 9,519, according to the Department of Tourism and Commerce Marketing, which is much less than what is needed for the anticipated 20 million visitors per year by 2020. So again, the supply-demand imbalance exists,” says McLoughlin.

For investments, this, of course, is a breeding ground. If you invest in a project like the 5-star Emerald Palace Hotel Kempinski Hotel on the manmade island of Palm Jumeirah, you’ll get a guaranteed income of 8% per annum during first 5 years. The main advantages of this type of investment are, firstly, income guarantees, and secondly, it’s hassle-free nature with the property management all done by the managing brand, as well as the opportunity to have you own place to stay for vacation once a year.

Similar offers are in demand in other areas of Dubai: along Shaykh Zayed Road, in residential communities of Dubai International Financial Center, Downtown Dubai, Business Bay, Dubai Marina, Jumeirah Beach Residence, while return on investment in some areas can go up to 10%.

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