Dubai’s tourism sector is driving a surge in demand for short-term rental properties, prompting a wave of conversions by landlords and investors seeking to capitalize on the lucrative market, experts told Arabian Business.
As the city becomes one of the world’s most frequently visited tourism destinations, savvy real estate players are shifting towards vacation rentals, attracted by higher yields and the flexibility to wipe into peak seasons.
“In 2024, Dubai has already witnessed a significant growth in the volume of short-term rental accommodation available compared to 2023, and this trend is expected to continue,” said Louise Heatley, owner and Managing Director of Exclusive Links Real Estate Brokers.
“The increase in short-term rental accommodation, along with rental increase caps on long-term rentals, has encouraged more homeowners to enter the short-term rental market.”
According to Heatley, the demand drivers are multifaceted, ranging from the emirate’s appeal as a prime destination to flexible visa schemes attracting extended stays. “Government visa initiatives are encouraging more international interest. The quality of living in Dubai has attracted a new stream of predominantly European investors looking to utilize their properties permanently or temporarily, a convenience and flexibility only short-term letting will provide,” she added.
This new wave of investors predominantly includes British nationals, who reportedly snapped up the majority of properties in Dubai during the first quarter, outpacing traditionally more dominant investors from India and Russia—a development that a number of analysts affirmed in early this month’s talks with Arabian Business.
István Juhász, CEO and Co-Founder of Shard, a co-ownership podium, stated that the city’s real estate market is undergoing a “fantastic year across nearly all market components.”
“Dubai’s status as one of the most popular tourist destinations significantly boosts the demand for short-term rentals,” he added.
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Higher returns push investors to switch properties to short-term rentals
Changing to short-term rentals grows beyond satisfying tourist needs, experts said.
“While short-term leases typically generate 20-25 percent more income over a year compared to long-term rentals, based on a minimum of 80 percent occupancy, we are already seeing the annual income from short-term leases lessen due to the higher rental prices being achieved today,” said Heatley.
Abdullah Alajaji, Founder and CEO of Driven Properties, highlighted the financial incentives driving the trend. “Short-term rentals typically yield more income than long-term leases, especially during peak season. Another benefit of these rentals is that they offer owners more control over their properties.”
As the short-term rental market heats up, certain property types and locations emerge as clear frontrunners.
Properties in exceptional areas like Downtown Dubai and Palm Jumeirah produce significantly more profitable ROI than long-term rentals, according to Juhász and Alajaji, and have appeared as “top choices for tourists” – particularly those visiting Dubai for the first time.
“The enticement of higher returns linked to short-term rentals is alluring for investors, making it a compelling investment strategy in Dubai’s dynamic real estate market,” said Juhász.
Entire villas are also in high demand, particularly among larger groups and families. “Large villas, especially those with private pools and plenty of space, are favorites among families or groups traveling together. Luxurious villa communities in areas like Emirates Hills, Dubai Hills, or Jumeirah appeal to discerning travelers and locals seeking a lavish staycation,” Alajaji added.
“We need to acknowledge that guests booking short-term properties are not just on vacation but also business travelers, and therefore, properties in areas known for their affordability, amenities, and excellent transport links, as well as those offering a luxury lifestyle, tend to be the most appealing for short-term rental conversions,” said Heatley.
