Branded residences offer up to 100% higher rents

Dubai has evolved beyond being a transitional market.

Due to luxurious amenities and high demand from high net worth individuals, branded residences in Dubai can yield twice the rental income compared to non-branded residences.

According to industry executives, luxury and branded homes also exhibit a greater potential for price appreciation compared to other segments of the market.

Dubai is no longer considered a transitional market, as it attracts high-net-worth individual buyers who are choosing to establish a more permanent presence. This shift indicates the maturation of the real estate market in the region.

According to Lewis Allsopp, chairman of Allsopp & Allsopp, there is a consensus among investors, landlords, and tenants regarding the premium rental rates for high-quality ‘branded residences.’ These modern and well-designed living spaces, situated in desirable residential buildings, offer luxurious amenities and can command rents up to 100% higher than comparable ‘non-branded’ units in the same locations.

To meet the growing demand from the world’s affluent individuals flocking to the emirate, Dubai has witnessed numerous launches of branded residences in recent years, securing its position as the leading global destination for such developments. Local developers like Binghatti Properties, Danube Properties, RSG Group, Rove, and others have capitalized on this demand by introducing their own branded residences.

Last week, Binghatti Properties unveiled its third branded project, Mercedes-Benz Places, following Bugatti Residences and Burj Binghatti Jacob & Co. Similarly, Danube Properties collaborated with Fashion TV to introduce Fashionz by Danube, featuring over 700 apartments spread across 65 floors.

Allsopp predicted that the Dubai rental market would maintain its strong performance for landlords and investors until the introduction of a significant number of ready off-plan rental units in 2025-27, capable of meeting the existing level of rental demand.

Greater price increases also

Allsopp anticipates a significant level of interest from buyers and investors in the prime and branded residences market segment, stating that luxury homes possess a higher potential for price increases compared to the rest of the market. The increased demand for readily available secondary inventory and the limited supply of new prime properties in prestigious locations expected to enter the market in 2024 are driving sales prices upward. These conditions are expected to result in sustained capital appreciation and present high rental yield opportunities for properties within Dubai’s most desirable residential locations, according to Allsopp.

According to Knight Frank’s latest data, Dubai claimed the top spot globally in terms of $10 million-plus homes. Last year, a total of 431 luxury homes were sold in Dubai, surpassing sales in New York (159), London (150), Hong Kong (148), and Los Angeles (13). Allsopp emphasizes that luxury homes priced over $10 million have the potential for greater price increases than the market average, as they attract demand from less price-sensitive buyers seeking long-term investments. Additionally, Dubai’s stable real estate market makes it an appealing option for international property diversification, he added.

Buyers coming to Dubai for quality

Over the last two or three years following the Covid lockdowns, high-net-worth buyers have been migrating from continental European countries such as the UK, France, and Germany to settle in Dubai. This trend is partly driven by the absence of real estate tax in Dubai, resulting in a surge in property prices.

Chris Whitehead, the managing partner at Dubai Sotheby’s International Realty, highlighted that buyers are attracted to Dubai for its property quality, value for money, cleanliness, and retail offerings. Traditionally, Dubai was viewed as a transient location where people came to earn money and then returned to their home countries. However, the current trend shows that many individuals are now choosing to move to Dubai for the lifestyle and are opting to stay.

In the previous year, Dubai witnessed record-breaking sale prices, with super-luxury residences fetching prices of up to $4,000 (Dh14,692) per square foot. This marks consecutive year-over-year increases in sale prices since 2020.

Whitehead anticipates a sustained high demand for luxury properties, fueled by the recent political unrest in specific Middle Eastern countries, which is pushing more buyers towards Dubai due to its perceived safety and stability.

According to Lewis Allsopp, the demand for prime residential properties is expected to persist throughout 2024. Due to a significant shortage of new inventory scheduled for handover in 2024, he stated, “We predict ongoing increases in sales transactions, capital appreciation, and rental premiums within this residential sector.”

Dubai no longer transitional market

Sotheby’s International Realty highlighted the challenge lies in locating prime land in Dubai.

“Buyers are inclined towards the beach lifestyle rather than city living, and the diminishing land availability is driving up market prices. Individuals seek uniqueness and personalized features in properties, favoring turnkey options over construction projects. They are willing to invest in ready-to-live-in homes,” Whitehead explained.

He emphasized that Dubai currently offers significant value for trophy-asset properties.

“Buyers are shelling out two to three times the price per square foot compared to London, and the absence of taxes in Dubai adds to its appeal. The ultra-high net worth individuals of Dubai prefer spending winters in the region and summers in Europe,” he noted.

According to Whitehead, the outlook for super-luxury properties in Dubai remains optimistic. “There is no indication of a slowdown. With limited supply and robust demand, Dubai has evolved beyond being a transitional market. Buyers are choosing to establish a permanent residence, contributing to the market’s maturation,” he concluded.