Dubai’s tourism industry is fuelling a rise in demand for short-term rental properties, leading landlords and investors to convert their properties to take advantage of this profitable market.
As Dubai ranks among the world’s top tourist destinations, astute real estate players are shifting towards vacation rentals, drawn by the promise of higher returns and the flexibility to exploit peak travel seasons.
“In 2024, Dubai has already seen significant growth in the volume of short-term rental accommodation available compared to 2023, and this trend is set to continue,” stated Louise Heatley, owner and Managing Director of Exclusive Links Real Estate Brokers.
“The surge in short-term rental accommodation, along with caps on long-term rental increases, has motivated more homeowners to enter the short-term rental market.”
According to Heatley, the factors driving demand are varied, from Dubai’s allure as a premier destination to flexible visa schemes promoting longer stays. “Government visa initiatives are attracting more international interest. The high quality of life in Dubai has drawn a new wave of predominantly European investors who seek to use their properties either permanently or temporarily, a convenience and flexibility only offered by short-term letting,” she added.
British Investors Lead Surge in Dubai Property Purchases, Opting for Short-Term Rentals
This new wave of investors mainly comprises British nationals, who have reportedly purchased the majority of properties in Dubai during the first quarter, surpassing traditionally dominant investors from India and Russia – a trend confirmed by several experts.
István Juhász, CEO and Co-Founder of Shard, a co-ownership platform, noted that the city’s real estate market is experiencing a “remarkable year across nearly all market segments.”
“Dubai’s popularity as a top tourist destination significantly increases the demand for short-term rentals,” he added.
Higher returns are driving investors to convert properties to short-term rentals
Experts explained that converting to short-term rentals goes beyond merely meeting tourist demand.
“Short-term leases typically generate 20-25 percent more income annually compared to long-term rentals, assuming at least 80 percent occupancy.
Abdullah Alajaji, Founder and CEO of Driven Properties, highlighted the financial incentives behind the trend. “Short-term rentals usually yield more income compared to long-term leases, especially during peak seasons. Another advantage of these rentals is that they offer owners more control over their properties.”
As the short-term rental market intensifies, certain property types and locations are emerging as clear favourites.
Prime Locations in Dubai Offer High Returns on Short-Term Rentals, Says Real Estate Experts
Properties in prime locations like Downtown Dubai and Palm Jumeirah offer significantly better returns on investment than long-term rentals, according to Juhász and Alajaji, and have become “top picks for tourists” – particularly those visiting Dubai for the first time.
“The allure of higher returns associated with short-term rentals is attractive to investors, making it a compelling investment strategy in Dubai’s dynamic real estate market,” said Juhász.
Entire villas are also highly sought after, particularly by larger groups and families. “Large villas, especially those with private pools and ample space, are favourites among families or groups travelling together. Luxurious villa communities in areas like Emirates Hills, Dubai Hills, or Jumeirah appeal not only to discerning travellers but also to locals seeking an opulent staycation,” Alajaji added.
“We need to recognise that guests booking short-term properties are not just on holiday but also business travellers, 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 attractive for short-term rental conversions,” said Heatley.
