Tourism a ‘blessing’ for dubai

For the past few years Dubai has proven itself to be the darling of the property investment world both within the Middle East and beyond, it continues to offer high rental yields and a very good capital growth rate of near 10% which we see today...

Yet Dubai's development has not just been restricted to the real estate sector, the tourism sector has grown by leaps and bounds in the past 3 years alone.

With tourists staying in Dubai hotels numbering 5.4 million in 2004, whilst in 2006 tourist staying in Dubai hotels grew significantly to 6.5 million people.

With the number of hotel rooms and flats numbering 40,862 in 2006 and the government of Dubai aiming to reach a target of 8-10 million tourists by 2010 shows that there is at present a significant gap between growing demand and availability of supply for tourist accommodation which may be increasingly felt as major future attractions such as Dubai land and Dubai Sports City open for business.

Very high occupancy rates

This level of growth in the tourism industry in Dubai has led to a very high occupancy rate for hotel rooms and apartments for example the occupancy rate stood at 85% in January 2007 alone.

This has presented Dubai and UAE property investors as a whole with a splendid potential to capitalise on this growing market, the traditional method of property investment in such as buy to lets in Dubai may offer investors around 8% rental yield per annum.

Yet short term letting tenants are charged hotel rates per night which depending on location and quality of properties, landlords can stand to make 10-15% rental yield per annum at today's hotel rates.

This is a situation which is not solely confined to Dubai; it is also very much applicable in other Emirates such as Ras Al Khaimah especially in established resorts such as Al Hamra Village, where hotel accommodation does not suffice to meet demand.

Taking advantage of the accommodation supply gap

A common question asked by many investors is what is the best way take advantage of accommodation supply gap in Dubai?

There are two main routes which buyers can take with regards to this:

The 1st method is to purchase an apartment or villas and utilise a high quality property management company which will take care of an investors property. Normally the management charge will be 20-25% of the apartment's rent per annum. It may also be necessary to buy a furniture package from property Management Company which may cost £2-£5K.

The second option available to investors is to purchase a hotel apartment in one of the key future tourist locations such as Sports City in Dubai, such as The Cube. These developments are often managed by 5* hotel companies which will in many some occasions give investors rental guarantees and 30 days complimentary stay within the hotel. These are developments in a majority of cases will be fully managed, maintained and furnished with no additional cost to yourself.

Hotel apartments ‘ideal’ investment solution

Those property investors looking for long term investments who do not intend to move into their properties should consider the hotel apartments as their ideal investment solution.

It is a type of property which does not require any significant effort on behalf of investors in terms of finding a capable property management firm to maximise property rental turnover, which saves both time and money.

Short term holiday letting is the ideal form of buy to let for the savvy Dubai investor, with rumours of rental stabilisation in the traditional buy to let market, holiday home letting presents one the best potentials for sustained high rental yields.