Strategic luxury home renovations can double return on investment, experts say

Home renovations are proving to be a lucrative investment strategy as property owners in some of Dubai’s most exclusive villa communities are raking in millions in profit, experts told Arabian Business.

In the affluent villa community Al Barari, homeowners are reportedly earning up to 100% premiums, or upwards of $10 million in profit, shortly after spending approximately $3 million in renovation costs, according to Ellie Street, Area Sales Manager at Maria Morris Real Estate.

These renovations go beyond mere upgrades. Villa owners are adding uber-luxurious features such as cinema rooms, indoor and outdoor pools, gyms, steam rooms, spas, elevators, and even bowling alleys. These investments can add on approximately $10 million to the property listing price if done up to quality standards.

“The refurbished homes boast exclusive interior and exterior designs rivalling or surpassing new constructions in elegance and functionality,” Street told Arabian Business.

This trend is being driven by soaring property prices for high-end luxury villas, as overseas demand for prime residences in the emirate continues unabated. Since the beginning of 2024, prices of $10 million-plus homes in Dubai have grown at one of the fastest rates globally, with villa prices exceeding $560 on average per square foot for the first time in ten years, according to the Valustrat Price Index. As a result, many property owners have turned to home renovations to meet demand for customised luxury living spaces.

“With significantly lower prices in Al Barari, when compared with other prime and super-prime communities, property buyers are investing more in their homes, drawn by the larger plot sizes,” said Street. Currently, 50 percent of their clients are buying properties with the intention of making substantial profits through renovation, a significant increase from a few years ago when only 20% of clients were doing so.

Similarly, areas such as The Lakes, Jumeirah Park, and Jumeirah Islands are also seeing an uptick in home renovations. According to Cushman & Wakefield Core data, the majority of these districts have seen a year-on-year increase in sale prices of more than 20%.

“These villa districts boast of central locations with well-established schools and amenities as well as spacious layouts, therefore, after upgrades, they can command and achieve substantial premiums,” said Prathyusha Gurrapu, Director and Head of Research and consultancy at Cushman & Wakefield Core.

Turn-key properties in demand

In the quest for maximum returns, Dubai’s property experts have discovered that fully upgraded, turn-key villas offer the most lucrative opportunities – regardless if the property is 10 or two years old.

“What we struggle with is partial renovations,” said Street, adding “[investors are] not willing to pay any form of premium for partial upgrades because they could get the standard villa unit for the same price. So what we tend to see is that if you’re going to renovate [to add property value] it needs to be everything.”

According to a new report by the global property consultancy Knight Frank, 57% of high-net-worth individuals (HNWI) purchasing property in Dubai this year want complete turnkey properties. These buyers are looking for fully renovated and furnished villas, as if they are “literally coming to the country and moving in straight away,” Street noted.

Renovations determine villa price points

While determining the exact value from a specific upgrade can be challenging, property owners can instead focus on identifying the renovations needed to command premium prices based on previous listings.

According to Street, properties listed at $9-10 million should include large bedroom sizes, master suites with walk-in closets, a pool, and an office space. Properties listed over $11 million would be expected to have a cinema room, while those listed over $12 million would have amenities such as a gym and bigger room sizes, with perhaps a lift, wellness spa, and additional entertainment areas for families and guests.

Renovations also involve reconfiguring spaces and layouts to accommodate various lifestyles, with particular attention given to kitchens, living areas and bathrooms, where updated features not only enhance property value but also offer endless customization possibilities.

Renovation trends that add value to properties

According to Charu Gandhi, Founder and Director of design architect firm Elicyon, adding luxurious amenities to a property in the hopes of achieving a $20 million property sale is not a simple task.

Gandhi, whose expertise was instrumental in the record-breaking $28 million sale of the One Palm penthouse, and is currently designing the luxurious Tilal Al Ghaf residences project, advises against focusing solely on quantity and instead emphasises the importance of quality.

“Ultra-high-net-worth clients see a lot of good quality projects, and they’re very quick to notice if it’s not being done to a good standard,” Gandhi said. “So to do quantity for the sake of quantity is a bad idea.”

As potential buyers are becoming more demanding in terms of the looks and stylish organisation of the space, Gandhi suggests that quality finishes can sometimes be a better value-added enhancement than simply adding a wellness spa.

“Usually, the best value-added enhancements are what people can see and touch, such as good quality door handles, lighting, and switches. Also, good acoustics can make a big difference, so that each room has its own sound insulation,” she added.

UHNWI prioritise sustainability

Sustainability and longevity are also a growing concern among HNWI buyers, according to Gandhi. “We are finding that among our clients, they care increasingly about sustainability as a topic and want to know the provenance of where items and materials are sourced from and what the history of the legacy is,” she said.

This can be specific materials sourced from rare regions in the world or features that make the property “one of a kind.” She notes that tactile elements such as good-quality air conditioning and air filtration are investments that have contributed to the success of renovated properties.

Gandhi also advised to keep inbuilt flexibility throughout the detail of the property, as many buyers look for these features.

Adding to that, Street noted, “If you’re doing it as an investment, it needs to appeal to as many people as it can, so that you aren’t pigeonholing yourself into one particular buyer”.

How much should a full renovation cost?

When it comes to renovating a home in Dubai, the costs can quickly add up. Property experts explain that costs involved for a full house renovation will include payment for construction and finishing materials, home styling – necessary furniture, appliances, and decorative items – and labour costs.

While Street has seen clients spend upwards of $4 million on high-end materials and finishes, with careful planning and the right expertise, allocating costs can be managed more effectively.

“Knowledge in terms of the right contractors and the right construction to use, [homeowners] might only need to spend [between] $500,000 to $800,000 and still achieve results that look like they’ve spent $1.5-$2 million,” Street said, adding that renovation costs will vary determined on plot size and materials used.

However, regardless of how much you plan, industry experts said the escalation of house renovation costs will be over and above the general price in the residential real estate market in Dubai.

“Every year, it becomes more and more expensive to renovate an apartment [or villa] in Dubai,” said Anton Kaptur, Head of Project Management at Colife, adding that he foresees the average cost of renovation to increase by another 10% in 2024.

“[Material and labour] prices move up in tandem with the increase in the market prices of the apartments [and villas],” Kaptur explained.

Industry players said not only have construction materials and furniture become more expensive, but the cost of contractors’ work has also seen a significant increase recently.

“It’s really important to give the commencement of a project the time to understand what you want out of it because otherwise, you set it up for failure. It’s really important to be guided by an expert on how best to allocate budget and on a time frame for the significant contributions to the property,” Gandhi added.

Source

Strategic luxury home renovations can double return on investment, experts say (image)

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