Investing in Al Reem Island’s property

Al Reem Island offers favourable investment opportunities, as it proves to be the most sought-after area in terms of apartment rentals during the first half of 2023. The average return on investment in the area is 6.6%, which is among the highest ROI in Abu Dhabi.

Al Reem Island became the top area for apartment rentals during the Q1 and Q2 of 2023. This year it holds the leading position compared to 2022, when the island ranked third in terms of tenant demand. These figures indicate the increasing popularity of the area among individuals looking for a comfortable neighbourhood to live in Abu Dhabi.

Potential tenants choose Al Reem Island based on the following advantages.

1. Families are looking for a neighbourhood which offers educational facilities and places to go out and about in the evenings and at the weekends. The area has a number of schools and nurseries that follow the British and American curricula. Reem Central Park and Al Fay Park are within walking distance of some residential complexes and offer children’s play areas and sports courts.
2. Business professionals choose residences that are close to their workplace. Al Reem Island can offer developments that include residential and/or commercial properties, including Al Qurm View, Sky Tower, Addax Park Tower, Tamouh Tower, and many others. Within a 10-minute drive from the neighbourhood, there are IT company offices, banks, airline headquarters, hospital buildings, and much more.
3. Students come to Al Reem Island to study at Sorbonne University Abu Dhabi, which is the French and English speaking branch of Paris-Sorbonne University.

Due to the strong demand among different categories of tenants, the total number of residents on Al Reem Island has increased. As a result, there is a greater chance for investors to rent out their property profitably.

Investors can generate a high stable income for renting their property out on Al Reem Island. The table below shows the average return on investment rate for Q1 and Q2 2023.

Important! ROI is the return on investment rate for renting out a property, which can be calculated with the following formula:

ROI = annual rental income / property value * 100

The ROI on Al Reem Island corresponds to the average rate of return across the emirate, which in the first half of 2023, varied from 5 to 7%. As of Q2, the yield on investment for studios increased by almost 1%, which was caused by a decrease in the average purchase price at equal rental fees.

Minor changes in ROI for two-bedroom apartments can be explained by a slight increase in purchase and rental costs by the second quarter. The decrease in ROI for 1 and 3 bedroom properties is due to a price growth by nearly a quarter from Q1 to Q2.

The article presents the average yield for studios and apartments, and at these rates a property can be recouped in 14–19 years.

Al Reem Island offers apartments in the affordable, mid-range and luxury segments, providing investors with a good choice of properties to rent out their property based on their allocated budget.

Purchase prices

Below is a comparison of the annual price change within the area.

Important! The listed prices are provided by the official government statistics DARI, which is a reliable digital ecosystem for Abu Dhabi’s property market. You can explore the data directly from www.dari.ae.

This table shows the tendency of annual increases in price. The minimum growth was observed for studios — by 3%, while apartments reveal more significant figures. The cost of residences with two bedrooms has increased by 18%, and properties with 1 and 3 bedrooms by 28–29%.

Additionally, investors will find it more profitable to buy a property during an earlier phase of construction. Each year, the cost of residences on Al Reem Island have increased by almost a third of the amount that investors paid a year before.

Rental prices

Rental prices in the area remain stable from Q2 2022 to the same period in 2023. Because of consistent rental fees, investors can be confident that their annual income will not decrease.

According to the legislation of Abu Dhabi, the owner of a property can raise the rental price once a year by a maximum of 5%. As an example, we consider the average price of a one-bedroom apartment and calculate the 5-year difference.

With a consistent increase in rental costs by 5% per year, investors can expect the payment to grow by AED 15K (USD 4.1K) over 5 years, which amounts to 27% of the property price.

As for inflation, this is as high as 2% according to the UAE National Bureau of Statistics data released in June 2023. This makes it profitable to rent a property on Al Reem Island, as the annual price growth is higher than inflation.

Al Reem Island features studios and 1–5 bedroom apartments. Investors can consider offers by reputable UAE developers, including Reportage Properties, Aabar Properties, RAK Properties, Tamouh Investments LLC, and many others.

Real estate by Aldar Properties, who is the emirate’s most sought-after developer, is also available in the neighbourhood. This company is renowned for its projects in Abu Dhabi, such as Yas Mall, Saadiyat Beach Golf Club, and the five-star W Abu Dhabi. Residential and commercial complexes on Al Reem Island by this developer include Arc Towers, Gate Towers, Sun and Sky Towers, and many more.

Note! Investors can consider buying a property in the popular residential project of Gate Towers. The initial cost of a one-bedroom apartment is AED 840K (USD 229K).

Should investors change their plans and decide not to rent out their property, they can sell it on favourable terms instead. Prices can rise by almost a quarter of the real estate value over one year or by about one-sixth over a period of one or two quarters.

Since property values on Al Reem Island go up in various periods, investors can resell it at a higher price than what they previously bought it for. Below are some examples that have not yet appeared in this article.

Al Reem Island is an attractive investment destination. The property owner can earn a stable income because of the area’s popularity with those who come to Abu Dhabi to set up a long-term residence. As property values in the area increase, it is possible to resell an apartment at a higher price in case plans to rent the property out change.