Comparing Rental Yields: London Buy-to-Let vs Dubai Off-Plan

London and Dubai are two markets you have possibly encountered if you're considering purchasing real estate. These two cities are popular with investors around the world. But when it comes to how much money you can make from renting out a property, they are very different. London is known for being stable, but it often has lower rental returns. Dubai, on the other hand, usually offers higher rental yields, so you could earn more from rent compared to the property's cost. Let’s take a clear look at the real numbers and what they mean for investors.

What Exactly Is Rental Yield?

Rental yield is the return you get on a property based on the rent it brings in, compared to how much you paid for it. It's usually shown as a percentage. So if you bought an apartment for AED 700,000 and it gives you AED 55,000 a year in rent, that’s a 7.86% yield.

Rental Yield is useful as a starting point, but doesn't reflect the whole picture. You must also consider taxes, repair costs, service charges, and vacancy rates for the property. Nevertheless, yield is a good initial comparison number when assessing properties.

London Buy-to-Let

Let’s start with London.

A Buy-to-Let property in London is a home that someone buys to rent out and make money from. The owner can buy it either off-plan or as a ready-to-move-in property. They earn money in the short term through rent and hope to sell the property later for a profit.

London property has always been expensive. But people still buy there because it feels like a safe investment. The city has a strong economy, good schools, great transport, and overall stability, which attract buyers from around the world. If we talk about the returns, rental yields are quite low. As of early 2025, the average rental yield is around 4.3%, depending on the area. In top spots like Kensington or Chelsea, it can be as low as 2.5%, while in affordable areas like Ilford or Croydon, you might get close to 5% to 5.5%. 

The reason is simple. Property prices are very high, but rent hasn’t grown as fast. For example, a 2-bedroom apartment in Zone 2 costing £800,000 and renting for £2,800 a month gives a 4.2% rental yield. But after agent fees, service charges, mortgage interest, taxes, and times when it’s not rented, the actual net yield might drop to 3% or less. So, is it worth it? Maybe, if you are hoping the property value will rise over time. But if you are looking for a higher monthly rental income, London may not be the best choice. 

However, here are some of the areas with higher ROI.

Dubai Off-Plan

Now let’s flip to Dubai.

Dubai’s property market is quite different from London’s. There’s no income tax, fewer rules for foreign buyers, and many people buy “off-plan”. Off-plan means buying a property before it’s built, paying in instalments, and either renting or selling it once it’s ready. 

Rental yields in Dubai are higher than in London, averaging around 6% to 8%. In popular areas like Jumeirah Village Circle (JVC) or Business Bay, yields can reach 9% or more, especially for smaller apartments. Some short-term rentals can even bring in 11–12%, depending on location and how well they are managed. For example, if you buy a 2-bedroom apartment in JVC for AED 1,500,000 (about £ £300,000) and rent it out for AED 110,000 a year, that’s a 7.3% yield with no tax on rental income. 

London vs Dubai: A Detailed Comparison

Here’s a side-by-side comparison of two similar investment properties. For London, we have a 2-bedroom apartment in Zone 2, and for Dubai, a 2-bedroom off-plan apartment in Jumeirah Village Circle (JVC). Both are popular areas for renters, but they offer very different returns and costs.

Let's break down the comparison to help you decide which investment might be better for you.

Initial Outlay & Affordability

London: Requires a higher initial capital outlay of £843,000.

Dubai: The total initial outlay is AED 1,565,000, which is equal to approximately £313,000. The Dubai property market is more affordable in terms of upfront capital required.

Rental Yield Comparison

London: The estimated rental yield for the first year is 3.22%.

Dubai: The estimated rental yield for the first year is 6.23%.

Additional Buying Costs, such as Stamp Duty and Dubai Land Department (DLD) fees, are one-time expenses. They are part of your initial investment but do not recur annually. Therefore, the denominator in the rental yield calculation changes from year 2 onwards. Let's assume the market value of the property remains the same as the purchase price, then rental yields from year 2 would be:

London: 3.39%

Dubai: 6.50%

Tax Implications

London: Rental income is subject to UK Income Tax. As shown, even with a Personal Allowance, a portion of the rental profit is taxed (in our example, £3,486), which reduces net income. 

Dubai: The UAE (including Dubai) has no income tax, no capital gains tax, and no annual property taxes on residential rental income, which is a major advantage.

Liquidity & Management

London: An existing property takes less transaction time and has immediate rental income. Management can be done locally or through agents.

Dubai (Off-Plan): Income only starts after completion. While off-plan often comes with attractive payment plans, there's a waiting period and the possibility of construction delays.

Which is Best for Investment?

The Dubai off-plan appears to be the better option for generating a respectable monthly income. It offers greater returns, is less expensive, and does not impose taxes on rental income. If your main goal is to earn a strong rental income and make the most of your investment, and you don’t mind waiting a bit for the property to be ready, then an off-plan option in Dubai is a smart pick.

Conclusion

If you want a safe and steady investment, where the property value grows slowly over time, then London could be a good option. The rental income might be lower, but it’s more stable. On the other hand, if you are looking for higher rental income and are okay with some risk (like construction delays), then Dubai’s off-plan property could offer better returns. Just make sure you do proper research, check the developer’s track record, review the payment plan, understand service charges, and confirm when the property will be ready.

Dubai is standing out right now for property investors. With higher rental income, easy payment plans for off-plan apartments, and no tax on rental income, Dubai helps you earn more and spend less.

Contact us today to explore the opportunities in Dubai's booming real estate market. Our experienced real estate consultants will guide you through the best off-plan investments.