Real Estate Payback Period

Where Real Estate Brings Profit Faster: Dubai Versus Other Metropolises

Payback period (PP) is the period of time required for the income generated by an investment to cover its initial costs. Formula:

PP = Initial Capital / Annual Cash Flow

Payback point is the moment in time at which net income becomes positive.

In real estate, the cash flow generated by an investment is the rent, and the capital is the price of the property and the costs associated with the transaction.

Comparison Method

Let's compare the PP for real estate in Dubai, London, New York, Moscow, and Singapore.

On the Numbeo portal, we will select data on the price of real estate and the cost of rent for these cities.

Dubai

Price per m² for an apartment:

• Not in the City Centre – $2,810
• In the City Centre – $4,845

Monthly cost of renting 1-bed apartment:

• Not in the City Centre – $1,350
• In the City Centre – $2,210

Let's assume that the area of the apartment is 50m². Then PP: 

• Not in the City Centre = (2,810 * 50) / (1,350 * 12) = 140,500/16,200 = 8.67 = 9 Years
• In the City Centre = (4,845 * 50) / (2,210 * 12) = 242,250 /26,520 = 9.13 = 9 Years

When calculating, we do not take into account the cost of service charges, the increase in rent and income.

PP for the Apartment

Not in the City Centre

• Dubai – 9 Years
• New York – 16 Years
• London – 21 Years
• Moscow – 26 Years
• Singapore – 27 Years

In the City Centre

• Dubai – 9 Years
• New York – 18 Years
• London – 27 Years
• Moscow – 28 Years
• Singapore – 32 Years

Although the calculation is approximate, it allows one to obtain factual results. Dubai is the leader among 5 major world cities, and it provides investors with the fastest payback.