While it is true that smaller apartments offer the best rental yields, it has also been true that capital gains on villas have been far higher in recent years. This trend is set to continue this autumn with villas in shorter supply than ever, and hordes of villa-dwelling bankers moving into Dubai.
Property buyers in Dubai have thus far tended to prefer the prospect of greater capital gains on villas than a better rental return on their capital.
A new report from Bahrain-based investment bank SICO notes that villas have appreciated in value by twice as much as apartments since 2002, while rental yields presently stand at around 5% for villas and 8% to 8.5% for studios and one-bedroom apartments.
This is a reflection of the preference for expatriate families to live in a villa rather than an apartment, with a garden, parking and independent access.
Then there is the simple fact that about ten times more apartments have been built than villas since 2002, so villas have both a scarcity value as well as being perceived as the better lifestyle choice.
This is not about to change anytime soon. The legions of bankers, stock brokers, lawyers and other financial professionals moving into Dubai are exactly the kind of person who wants to live in a villa, preferably in an upmarket community.
Global financial expansion target
Over the summer one independent study concluded that Dubai was the number one target for expansion by global financial services for the next few years. That is an awful lot of high-earning staff who are by nature villa dwellers.
Moreover, the supply of villas coming on to the market over the next few years is relatively small, and by contrast the number of luxury apartments is going to be fairly big, so the scarcity of villas is going to increase and not decrease.
Villas also offer a crucial extra feature. You actually own a piece of land rather than multiple occupancy rights. And in most countries of the world independent houses command higher prices than apartments, especially in the best locations.
In addition, investors point to the defensive qualities of villas in a possible downturn. People actually want to live in apartments more than villas so they are unlikely to ever be short of a tenant. In addition, villas in the best locations are more likely to keep their value, or at least suffer the smallest falls in value.
Finally villa owners are more able to determine their own maintenance bills. Apartments face annual hassles over the amount of their service charges; community charges for villas are generally far lower and maintenance is at the owner's discretion.
So it would be surprising if the Dubai love affair with its villas ended anytime soon and indeed with the red hot local economy this autumn putting further upward pressure on local house prices, villas will come out on top again for capital gains. Whether that will match the stellar house price increases of last year remains to be seen.