Long-Term vs Short-Term Rentals in Dubai: Income Potential Compared
Dubai’s real estate market in 2026 is shaped by measurable demand, regulatory maturity, and a rapidly expanding population and tourism economy.
For investors evaluating Dubai’s real estate, one question now defines profitability: Should a property be positioned for long-term leasing or short-term rental income?
This is a financial decision that directly affects cash flow, risk exposure, and long-term asset performance.
Understanding how each model performs in 2026 is essential for anyone considering a property purchase in Dubai.
This analysis examines verified data, rental growth trends, operating costs, and market fundamentals to provide a clear comparison between long-term and short-term rentals, so you can confidently make a decision.
Dubai’s Market Environment in 2025 and Beyond
Two macro forces defined Dubai’s rental market in 2025: record tourism and sustained population growth.
According to data from Dubai’s Department of Economy and Tourism data featured in National News, the city welcomed 9.88 million international visitors in the first half of 2025, representing a YoY increase of approximately 6%.
At the same time, Gulf News reported that Dubai’s population surpassed 4 million residents in 2025, driven primarily by professional migration, corporate relocations, and long-term residency incentives.
Expatriates continue to represent the majority of this population.
These parallel trends have created strong demand in both rental segments:
- Short-term rentals benefit from rising tourism volumes.
- Long-term rentals benefit from expanding residential demand.
As a result, both markets are growing, but at different rates and with different risk profiles.
Understanding Rental Yield in Dubai
Rental yield in Dubai remains one of the primary reasons global investors continue to allocate capital to the city.
Rental yield is calculated as annual rental income divided by the property’s market value. It measures income efficiency and provides a baseline for comparing investment opportunities.
As per a report by Marcella & Sons, long-term residential rentals now generate between 5% and 7% annual yields, depending on location, building quality, and tenant profile.
And short-term rental properties, particularly in high-tourism districts such as Downtown Dubai, Dubai Marina, and Palm Jumeirah, achieve annual yields from 8 to 12% when professionally managed.
This yield differential explains why many investors are shifting toward short-term models. However, higher yields also come with higher operating complexity.
To better understand how returns are measured in today’s market, it is essential to know how rental yield is calculated, service charges, and net returns in both the cases and then analyze their past performance.
For the first part, also if you are evaluating income potential before investing, read our recent article – How is Rental Yield Calculated in Dubai Real Estate.
Performance of Short-Term Rentals in 2025
Short-term rentals have experienced accelerated growth in 2025 due to structural changes in travel behavior and accommodation preferences.
Tourism-Driven Demand
Dubai’s hospitality sector recorded the average occupancy levels of Hotels in Dubai to be above 80% in H1 2025. Average daily room rates also increased by 5% year-on-year, while revenue per available room increased by 7%.
As hotel prices rise, visitors increasingly choose licensed holiday homes and serviced apartments. This shift has strengthened the economics of short-term rental properties.
Licensed holiday home registrations increased by 35% in 2025, according to regulatory data from the Property Portfolio Investors.
Growth in Revenue
According to Airbtics, the average annual short-term rental revenue for AirBnB homes in Dubai was around AED 151,000- 156,000 per listing over the 12 months from late 2024 to 2025.
This growth reflects both higher occupancy and improved pricing power during peak seasons.
For investors, this translates into:
- Strong seasonal cash flow
- Flexible pricing strategies
- Exposure to international demand
- Potential for premium positioning
When managed effectively, short-term properties can significantly outperform traditional leases in terms of gross income.
For investors considering short-term rentals, understanding the regulatory and setup requirements is crucial before launching a holiday home.
Read the full guide here: Setting Up a Holiday Home in Dubai.
Performance of Long-Term Rentals in 2025
Despite the rise of short-term rentals, long-term leasing remains the foundation of Dubai’s residential market.
Population-Led Stability
Dubai’s expanding professional workforce continues to drive demand for annual rental contracts.
Corporate employees, entrepreneurs, and families prefer stability, community access, and predictable housing costs.
Golden Visa and long-term residency programs have reinforced this trend, encouraging residents to establish their roots in Dubai.
Rental Growth
According to Dubai Economy and Tourism data and brokerage reports, long-term rental rates increased by approximately 13% in 2025 across major residential districts.
This represents healthy growth driven by limited supply in certain segments and sustained tenant demand.
Risk Profile
Long-term rentals offer several structural advantages:
- Predictable income streams
- Lower vacancy risk
- Reduced operational involvement
- Minimal seasonal volatility
For investors prioritizing capital preservation and consistent returns, this model remains highly attractive.
Explore what is currently shaping rental demand, from population growth to tenant preferences and yield trends. Read Apartment Investment in Dubai: What Drives Rental Demand Today.
Service Charges and Operating Costs
No rental analysis is complete without accounting for expenses.
Service charges in Dubai vary significantly by building, developer, and community. Premium waterfront and lifestyle developments carry higher maintenance and management fees.
For long-term rentals, service charges are usually the primary recurring expense.
For short-term rentals, additional costs include:
- Holiday home licensing
- Property management fees
- Platform commissions
- Furnishing and refurbishment
- Utilities and cleaning
These costs can reduce headline yields by 2 to 4% points if not carefully managed.
Investors must therefore focus on net returns rather than advertised gross yields.
Comparing Year-on-Year Growth in 2025
According to DDA Real Estate, long-term leases recorded average rent growth of about 13%, while short-term and holiday rentals saw even sharper increases, reaching 18%.
At the same time, tenant expectations have shifted, with growing demand for modern, well-equipped properties in strategically located communities, further intensifying pressure on already high-demand districts.
This divergence highlights the importance of infrastructure and its influence on rental strategy.
How to Choose the Right Strategy
There is no universal “best” model. The optimal strategy depends on financial goals, risk appetite, and management capacity.
Short-term rentals are suitable for investors seeking higher income potential and willing to manage operational complexity.
Long-term rentals are suitable for investors seeking stable, predictable returns with minimal involvement.
Many experienced investors, especially HNIs, now adopt hybrid portfolios, allocating assets to both segments to balance growth and stability.
The Influence of a Renowned Developer
Market expertise is critical in navigating Dubai’s evolving rental landscape.
Danube Properties supports investors by providing:
- Data-driven yield assessments
- Transparent cost analysis
- Community-level performance insights
- End-to-end acquisition support
Whether evaluating Dubai’s real estate for short-term rental income or long-term capital appreciation, professional guidance reduces risk and improves returns on investment.
And that’s where the expertise and portfolio of well-renowned developers like Danube help investors with real-time case studies in making data-backed decisions.
Conclusion
The 2025 rental market confirms that Dubai has entered a mature, data-driven investment phase.
Short-term rentals benefit from record tourism and rising accommodation demand, delivering strong rental yield in Dubai for actively managed portfolios.
Long-term rentals benefit from the number of residents growing and innovative residency reforms, offering consistent income and reduced volatility for real estate investors.
Service charges in Dubai, regulatory compliance, and operational costs remain decisive factors in real-world profitability, especially for short-term rentals.
A successful property purchase in Dubai in 2026 requires strategic alignment between market data, financial objectives, and professional execution.
Investors who understand these dynamics and work with experienced partners like Danube Properties are positioned to exploit both rental income and long-term appreciation in one of the world’s most resilient real estate markets.