What’s at Stake this week? | June 2nd, 2024

In Saudi Arabia, rental yields have surged by up to 50%, thanks to property upgrades and retrofits. Previously, older properties in Riyadh were underperforming, but modernization efforts have turned the tide. For example, apartment prices in Riyadh have grown by 57% since 2020, while villa prices have increased by 32%, as per Khaleej Times data. This transformation, driven by rising demand and strategic government initiatives, has made Riyadh a hotspot for property investors looking to capitalize on higher rental incomes and better returns.

📊Strategize With Stake

Maximizing your investment returns: Rental yield & property investors

Investing in property is a popular way to build wealth, but understanding the intricacies of rental yield is crucial for maximizing your returns.

Let’s start with what is a rental yield…

Specifically, gross rental yield, a term used to describe the return on property investment from a rental perspective. It represents the annual rent you receive from your buy-to-let property as a percentage of its market value. This specific ROI calculation helps you focus on rental income alone, excluding any property value appreciation.

Importance of rental yield from an investor’s perspective

Understanding rental yield is vital for making informed investment decisions. It allows investors to compare potential properties and determine which offers better returns. For instance, a property with a gross rental yield of 8% is generally more attractive than one with a 6% yield, assuming other factors are comparable, including:

• Property location
• Market demand
• Property condition

High-demand areas with strong infrastructure, employment opportunities, and amenities offer higher rental yields. Additionally, maintaining the property and fostering good tenant relationships can reduce vacancy rates and maximize rental income.

Maximizing rental yield with Stake

In Dubai, the average gross rental yields range between 7-8%. However, at Stake, our projected gross yield average is approximately 8.8%. Want to know how we plan to exceed this percentage? Our operations team employs a strategic analysis approach that focuses on key factors to ensure attractive returns.

Our strategy involves thorough comparisons of locations and properties, bringing the best offers forward after careful negotiation. This research is supported by future insights and aspirations to make the area more desirable, like upcoming projects and off-plan developments that might increase demand, thus boosting rental yield. This long-term acquisition strategy fosters sustained yields for our investors.

A living proof of this method is our 2-bed in Al Andalus, Jumeirah Golf Estates. Here, 579 investors recently benefited from a 16.6% increase in the rental rate which boosted the overall yield as well, majorly due to the up-and-coming nature of the neighborhood.

Bottom line? Whether you’re a Stake investor or not, it’s essential to understand the basics of real estate investing, which is all about investing to win. But if you have a platform that offers the win on a silver platter, why not take advantage of it?

📈Emerging Market Trends

Generation Investor: Insights into the new wave of investors

In recent years, a significant trend has emerged, leading to the rise of Generation Investor, or Gen I. With a median age of 35, Gen I is a diverse mix: 16% Gen Z, 55% Millennials, 22% Gen X, and 11% Boomers. This cohort, which began investing during the pandemic, has reshaped the retail investment landscape according to a Charles Schwab survey. 

Understanding the origins, motivations, and current behaviors of Gen I provides valuable insights into modern investment dynamics.

How did Gen I tap into the investment world?

Gen I, also known as the Class of 2020, originated during the pandemic in 2020, a period marked by unprecedented financial and social disruption. According to Rothmore Property, 15% of US stock market retail investors started investing in 2020, catalyzing a surge of new investors. Several factors contributed to this influx:

• Increased time at home: Gen I turned the challenges of COVID-19 lockdowns into opportunities. With so much free time and unprecedented change, 54% of Gen I started investing to build an emergency fund, and 53% sought to gain an additional source of income
• Heightened market volatility:  Unique market conditions, including an initial market crash followed by a rapid recovery, created lucrative opportunities that were hard to ignore
• Democratization of investment platforms: The rise of user-friendly investment platforms and educational resources lowered the barriers to entry, making investing more accessible to a broader audience

Zooming in: Gen I investing behavior

Four years after their initial entry into the market, Generation Investor (Gen I) has matured into a serious group of investors with distinct investment preferences and behaviors.

• Investment Preferences:

Gen I prefers a balanced approach, with 45% investing in stocks, 35% in ETFs, and 20% in cryptocurrencies, according to Property Match. This mix reflects their strategy of combining growth potential with diversification.

• Long-Term Strategy: 

According to data from the Q2 2024 – Charles Schwab survey, 88% of Gen I investors adopt a long-term strategy, avoiding frequent portfolio adjustments despite starting their investing journey in a volatile market. 

Bottom line? Recognizing Gen I’s motivations and behaviors helps optimize investment strategies, enabling financial advisors and platforms to effectively engage this influential group and capitalize on emerging market trends.