NKF Real Estate secures up to 20% recurring rental income through holiday homes for investors in Dubai

Fully-furnished holiday homes provide readily available facilities that make them attractive accommodation choices for vacationers and those seeking short-term stays for work or leisure, instead of hotels.

Dubai, UAE; November 17, 2023

The number of holiday homes in Dubai has reached 21,000 in 2023, around 2.82 percent of the 743,000 residential units in Dubai in 2022;

Holiday homes hosted 137,144 guests in Dubai in the first quarter of 2023;

In the first half of 2023, Dubai welcomed 9.83 million visitors, surpassing the pre-pandemic record. With such a high estimate, vacation homes are predicted to fetch Dh1.17 billion (US$319.1 million) in 2023;

Globally, revenue in the vacation rentals market is projected to grow a Compound Annual Growth Rate (CAGR 2023-2027) of 3.37 percent, from US$94.34 billion in 2023 to US$107.7 billion by 2027.

Holiday homes in the UAE usually fetch 2-3 times more rental income compared to income from long-term lease, which varies from 5-7 percent in Dubai – a reality that is encouraging estate agents such as NKF Real Estate to place investors’ properties on vacation rentals for maximum recurring income.

Currently, home-owners can benefit from up to 20 percent rental return on their assets per year – one of the highest Return on Investment (RoI) – in the world, if they place their properties on popular holiday home rental platforms. Although most property management agencies put investors’ homes on long-term leases that fetches between 5-7 percent returns, the newly-established NKF Real Estate has been fast to put its client’s homes on vacation rental market that is generating up to 20 percent of the investment in annual rental income for home-owners, depending on location, size and amenities.

For a property bought with Dh1 million, buyers could earn from Dh50,000 to Dh70,000 in rental income, that includes the service charges, which ranges between Dh12-20 per square feet. At this rate, a buyer would take around 15-16 years to recover the Dh1 million investment. In comparison, putting investors’ assets into vacation homes gives them more than 20 percent annual rental yield. This means, for a Dh1 million property, annual rent could fetch Dh200,000 per year and help the investor recover the total investment in 5 years’ time.

The number of holiday homes in Dubai has reached 21,000 in 2023, around 2.82 percent of the 743,000 residential units in Dubai in 2022. Holiday homes hosted 137,144 guests in Dubai in the first quarter of 2023.

“We have placed more than a dozen properties on vacation rentals that helps us to generate a much healthier, stress-free and safer income for property owners and landlords and in this way, we are creating greater wealth for our clients,” Nahida Khan, Founder and CEO of NKF Real Estate says. “We have so far recorded 40 percent more income compared to the rental income which makes my clients very happy. This way, our company is able to deliver better results.

“Holiday home market in the UAE will accelerate fast in future due to the high growth in the number of inbound tourists to the UAE, following the removal of the COVID-19 travel restrictions in recent years.”

Emirates Group — which includes Emirates Airline, the world’s biggest carrier of international passengers and its ticketing and ground handling subsidiary Dnata, recently reported a 138 percent jump in profits to a record Dh10.1 billion (US$2.7 billion), for the first half of the 2023-2024 financial starting from April 2023 till September 30, 2023, compared to Dh4.2 billion (US$1.2 billion) reported for the corresponding period last year, driven by strong demand for international passengers globally.

Emirates carried 26.1 million passengers between 1 April and 30 September 2023, up 31 percent from the same period last year. A large chunk of these passengers usually lives in hotels and vacation homes that is growing by the day.

The International Air Transport Association (IATA) recently said, “The industry is returning to profitability in 2023, only three years after the historic loss of US$140 billion in 2020. Total airline revenue is expected to recover to around 93 percent of the 2019 figure, with operating profits reaching US$22.4 billion.

“Overall, this performance shows how resilient the industry is, being able to bounce back so rapidly from a near total halt. It does, however, also show that robustness could be improved, in the interest of stronger balance sheets and safer profit margins.”

Looking forward, the demand for air travel is expected to double by 2040, growing at an annual average rate of 3.4 percent. Origin-destination passengers are projected to increase from around 4 billion in 2019 to just over 8 billion at the end of the forecast horizon, IATA said.

Nahida Khan says, “All these indicate that the holiday home market will continue to grow not only in terms of the number of vacation homes but also the rental yield – as the rental rate for room nights is going up due to high demand.

“Holiday homes are currently very high in demand amongst both the property owners – for greater revenue – and vacationers as this provides greater income for all industry stakeholders.”

Dubai is witnessing a growth in investment in short term rentals, also known as holiday homes, underpinned by the emirate’s bustling tourist industry. Holiday homes are fully furnished units, whether apartments, townhouses, or villas, leased out by a licensed holder for sub-letting to users for a short period of time.

Airbnb, a global online marketplace for holiday homes, reported that Dubai ranked first as the most profitable short-term rental city in the world. A one-bedroom apartment charges Dh160,000 (US$43,000) per year as a short-term rental, whereas the same charges Dh50,000 (US$13,000) as a long-term rental.

Registered under the Dubai Tourism and Commerce Marketing (DTCM) department, holiday homes provide services that tenants generally do not enjoy in hotels, thereby posing to be attractive accommodation alternatives. Due to the increasing number of users, expected to reach 2.21 million by 2027, investors eye holiday homes as lucrative opportunities for maximum revenue, instead of long-term rental units.

In the first half of 2023, Dubai welcomed a whopping of 9.83 million visitors, surpassing the pre-pandemic record. With such a high estimate, vacation homes are predicted to fetch Dh1.17 billion (US$319.1 million) in 2023, as per the report by Statista.com.

Greater demand and higher RoI are pivotal factors that have turned investors’ attention towards this market. On an average, short-term rentals yield from 20 to 30 percent RoI, which is quadruple the return yielded by conventional rentals.

Holiday Home Market Worldwide

Globally, revenue in the vacation rentals market is projected to grow a Compound Annual Growth Rate (CAGR 2023-2027) of 3.37 percent, from US$94.34 billion in 2023 to US$107.7 billion by 2027, according to Statista.com, a global market intelligence provider.

In the vacation rentals market, the number of users is expected to reach 900 million users by 2027. The average revenue per user (ARPU) is expected to amount to US$116.70. In the Vacation Rentals market, 75 percent of total revenue will be generated through online sales by 2027.

Holiday home market worldwide, dominated by Airbnb is gaining fast momentum due to increased air travel as the global aviation industry seen increased demand for quality services. Airbnb operates in 100,000 cities worldwide across 191 different countries. There are currently over 4+ million Airbnb hosts worldwide and 6+ million active listings on the platform. It has more than 150 million worldwide users that have booked over 1 billion stays. On an average 6 guests check into an Airbnb listing every single second. The average cost for an Airbnb in North America is $163 per night. Airbnb guests stay an average of 4.3 nights per booking. It takes users an average of 11 minutes and 31 seconds when booking a stay on the Airbnb app. The average host earns $13,800 annually. Airbnb’s current valuation is about $113 billion. It’s estimated that Airbnb now has a 20+% market share of the vacation rental industry.