Unpacking Real Estate Yields: UAE’s Comparative Positioning Against Global Markets.
Real estate markets are dynamic landscapes shaped by various factors, including rental yields and global market comparisons. One significant metric involves analyzing the difference between US 10-year sovereign rates and yield figures, offering insights into comparative standings. Presently, the UAE emerges as a hotspot, showcasing robust Real Estate Yields in prime office spaces and industrial/logistics sectors, ranging from 6.75-7.5%. The luxury spectrum reaches even higher, with select high-grade properties yielding 8-8.5%. Stability characterizes residential and luxury hotel spaces, boasting an average yield range of 6.25-7.75%.
In contrast, the US 10-year treasury yield of 4.52% underlines the favorable spread between UAE investment yields and US rates. Comparatively, London’s rental Real Estate Yields average 4-5.5%, while Shanghai’s Grade A property space boasts an impressive 9-11% Real Estate Yields in certain segments. However, these promising figures are within the context of ongoing economic housing market stress, contributing to an uncertain outlook.
London projects growth in rents over the next 2-3 years, but it’s not expected to surpass property selling price appreciation. Conversely, in the UAE, rental prices in Dubai surge nearly 1.5-2 times faster than actual property price appreciation.
Dubai’s initial surge in luxury property demand has expanded to influence various real estate segments. Abu Dhabi, a bustling market in commercial, industrial, and logistical spaces, witnesses prime space rents growing by an average of 20% across Grade A to C segments. While apartment growth rates stabilize, villas maintain their premium status and continue driving growth. Notably, Abu Dhabi’s villa market experiences growth in the mid-segment as well.
Looking ahead, potential US Treasury yield rises could narrow the gap between prime office yields and the risk-free rate. The UAE, amidst higher interest rates and an uncertain geopolitical outlook shared by major economies, sees healthy sales enquiries and buyer leads, especially in industrial warehouses and commercial segments. Investor-friendly policies signal opportunities for new businesses and potential expat population growth.
As a tourist hub, the UAE’s real estate market stands to benefit from repeated traveler visits, further supporting the industry’s growth trajectory.
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Source: Khaleej Times