Prospects for 2014 : Dubai Residential Market

 

ExpoHarbor expects 2014 to see continued growth in the residential segment of Dubai’s real estate industry and there are some fundamental factors which lead us to this conclusion -Dubai’s : economic growth for 2014 is expected to exceed 5 and maintain or even exceed this level leading up to the year 2020. The global economic recovery which, according to the IMF, is gathering pace and expected to deliver in excess of 3% growth. Given the amount of foreign investment in Dubai, a healthier world economy can only be beneficial.

The market is benefitting from a bow wave of demand as the broader economy stages a strong recovery. Granted, prices have been growing generally at around 20+% yoy, more in some areas, and there are renewed concerns regarding asset values. But remember, some areas lost around 60% of their values from the highs of 2008. The recovery has been underway for two years
now and the market is still around 22% shy of the highs reached five years ago. This would suggest the market still· has some way to go before a broad based major correction occurs. Increasing momentum, which is emanating from
renewed confidence in the emirate among business operators and investors alike.

This confidence is not just predicated on the stellar financial performance of real estate assets over the preceding two years, but also on the significant progress that the emirate has made in emerging from the global financial crisis including real estate regulatory reforms, successful debt restructuring and record levels
of economic activity in the non-oil economic sectors.

The increasing maturity of the marketplace as evidenced by the determination of real estate authorities and stakeholders to prevent the creation of unrealistic asset values driven by excessive speculation and irresponsible lending practices. The increasing levels of governance, over- sight and scrutiny that the industry is
experiencing are driving confidence back into the industry. The ongoing
development of the industry’s regulatory framework and implementation of laws and regulations to safeguard both consumer and investor interests, the overall industry and the economy at large from rampant and irresponsible speculative, predatory or unethical practices, reveals a mature and balanced approach to
shaping an industry which exhibits sustainable growth over the long term. The “free for air days of the past are long gone and investor, not speculator, confidence has been making a big comeback.

There will be an increase in supply of residential units, with over 20,000 residential units expected to be delivered in 2014, predominantly in the more affordable areas such as Dubailand, Silicon Oasis and Motor City. This new supply of affordable housing will be good news for those who have been seeking
relief from the recent rent hikes and lessen demand for the higher priced areas. There will be a number of new developments launched and stalled developments restarted. While most are not expected for delivery until 2076 and beyond, these developments provide an alternative for investors who would have the Dubai
2020 World Expo as a key milestone on their investment time horizon.

The inevitable increase in the US dollar and, therefore, the UAE dirham. With the gradual withdrawal of economic stimulus by the US Federal Reserve, a likely strengthening of the US dollar will inevitably make investment in Dubai real estate by foreign investors appear more expensive. For example, the dramatic weakening of the Indian rupee versus the US dollar, and therefore the UAE Dirham, must have an effect on the demand emanating from that country.

Whether a strengthening dirham leads to reduction in price of  imported construction materials and whether any such reduction is passed on to consumers is another matter. So, in summary, we envisage a Dubai real estate market in 2074, which will undergo the initial stages of value/price normalization yet still provide robust value growth and rental yields based upon sound economic fundamentals.

We will also witness an increasing level of resilience, sustainability and stakeholder confidence as the market continues to rake important steps towards full maturity through the ongoing development of policies and practices and effective oversight and governance.

 

 

ASK THE AGENT

 

mrmohanadI am looking at investing in a flat in Dubai for the long term. Can you advise me on the factors I should be concerned with?

As always, we must be thinking location, quality of the building and the completion status and quality of infrastructure and building amenities.

Anything which is close to the beach (especially with a sea view), a golf course view or situated somewhere close downtown is a good place to start. If you can also have close access to the metro, even better, and you will virtually be assured of renting your new property relatively easily at a rate which will provide a tax-free ROI of at least 5% net. These locations are mot likely to provide superior appreciation in capital value as well.

You also need to consider the effectiveness of the owners association (OA), service charges and the quality of maintenance services. Facility management is becoming increasingly more important to determining the value of buildings as it will,have an effect on the long-term value of your investment.

With a lot of new developments being offered, what do you think about buying off-plan vs.completed properties?

By buying off-plan, you can benefit from capital appreciation exceeding the market average in the period just prior to launch, and over the ensuing 12 months. However, remember that in purchasing a completed property, you will benefit
from the cash flow immediately providing you with an immediate yield on your investment.

To help you estimate which option will work best for you, seek the advice of a reputable real estate professional. They should be able to help you define your investment objectives, identify suitable investments and conduct a complete financial analysis.

Look for certain property types which you believe will be keenly sought in the future, and try to buy properties from developers who have a strong and stable track record.

Do you think that there are too many new projects being introduced too soon?

There have been projects unveiled with an estimated value of at least US$40 billion in the recent past. They include the world’s biggest Ferris wheel, a new “city within a city” , and a range of theme parks.

These types of developments are a little different to the random, unfettered developments of the pre-recession era in that they are tapping into what actually drives Dubai’s economic growth.

One reason why the economy is growing at a very healthy rate is because of a booming tourism industry. If you add to that a location which is one of the best cities for young professionals globally, you’ll see why investment in developing, and expanding an economic capability to satisfy a growing demand for tourism and entertainment makes sense.

It is ideal for the real estate industry to grow as a result of population growth driven by economic development. Many of the newly announced projects are aimed at doing just that.

With the recent uptick in prices, is real estate still providing real value?

Definitely. Remember, regardless of where the capital comes from, the market ultimately determines a broadly representative perception of value, and we believe that there is some way to go before the Dubai real estate industry is considered overpriced.

Of course, it varies by asset type. For example, the reason areas such as Emirates Living, The Villa Project, Arabian Ranches and the Palm Jumeirah have been appreciating so strongly is because of the superior value they are providing prospective owner-occupiers and investors to whatever exists elsewhere.

There are different types of buyers driving the demand. The first buyer type is taking the opportunity to upgrade from apartment-style to villa-style living. The second buyer type is upgrading villa type, style, size and location, and from a pure investment point of view.

Whether owning or renting. value will always attract interest and activity.

Question of the Week

There has been a lot written about the new investor Protection Law. Is it a case of too little too late , and how will people who have been disadvantaged during the financial crisis benefit from its implementation ?

In essence, The Real Estate Investor Protection Law is yet another step in the maturation of the Dubai Real Estate industry. We have always said that a viable and robust real estate industry requires three important elements which we call the 3Cs: Confidence, Capital and Clarity.

The law will go a long way to boosting the level of confidence of investors by protecting them from contract breaches or fraudulent activities by developers, and add clarity as to what legal protection they may draw upon’ if needed. In addition,it is expected that owners’ associations will be further strengthened by strengthening their legal status. All this is good news for the industry, going forward.

However, the degree to which the law may be applied retrospectively is likely to be limited. Already, those investors who have been disadvantaged by developers cancelling projects can take their case to a special committee set up specifically to handle these matters; while it is still not clear as to whether those investors experiencing delays in projects commenced prior to the new law’s introduction will be entitled to relief under its provisions.

 3 آلاف فيلا تدخل السوق العقاري في دبي 2014

355

قالت مصادر عاملة في القطاع العقاري ان دبي قادره على استيعاب المزيد من الفلل في ظل زياده الطلب من قبل المستثمرين والمستخدميين النهائيين مشيرة إلى أن المعروض الحالي من الفلل لا يلبي حجم الطلب الذي اتخذ منحى تصاعدياً منذ العام الماضي
وقدرت المصادر أن يصل عدد الفلل السكنية الذي سيدخل السوق مع نهاية العام الجاري الى نحو 3000 فيلا بينما عدد الفلل الذي سيتم طرحها نحو 7200 تشكل مايقارب 30% من مجمل الوحدات السكنية التي سيتم طرحها في 2014
وستتوزع المشاريع التي سيتم تسليمها بين كل من شركة “نخيل” و”دبي للعقارات” و”فالكون ستي” وغيرها من الشركات . بينما طرحت اعمار مجموعة من مشاريع الفلل منذ بداية العام مثل مشروع “ليلا” و”رشا” وتعتزم طرح مشاريع أخرى خلال العام الجاري . بينما طرحت “ميدان شوبا” مجموعة من الفلل ضمن مشروع “ديستركت” وهناك شركات أخرى تستعد لطرح مشاريع فلل جديدة خلال الفترة المقبلة
وأشارت المصادر إلى أن سوق الفلل السكنية تابع منذ بداية 2014 طريق التعافي والتحسن التدريجي الذي حققه في العام الماضي 2013 بمستويات نمو راوحت نسبها حسب المناطق بين 20 و35%، كما سجل أفضل التعاملات بين مختلف المنتجات العقارية
وقال الخبير العقاري مهند الوادية المدير الإداري في شركة “هاربور” العقارية: “يعيش العاملون في سوق عقارات دبي حالة من الترقب بخصوص تسليم الوحدات الجاهزة ضمن المجتمعات المكتملة مثل “بالما ريزيدنسس” الذي تطوره “نخيل”، وطرح كل من مشروع “ديستركت وان” الذي تطوره “ميدان شوبا” وغيرها من المشاريع”
وأضاف الوادية: “واكب قطاع الفلل السكنية منذ بداية العام الجاري 2014 علامات التعافي التي سجلها خلال العام الماضي على صعيد التعاملات العقارية بشكل عام ومنحنى الأسعار بشكل خاص التي ارتقت بمعايير تطوير البنية التحتية ومرافق الحياة الاجتماعية للسكان” . وأشار المدير الإداري في شركة “هاربور” العقارية إلى أن سوق العقارات في دبي يمر في الوقت الحالي بفترة النمو التي بدأ يستشرف بوادرها فيلعام ،2011 حيث شهدت أسعار أفضل مناطق الاستثمار في قطاع الفلل السكنية من حيث الأداء نمواً ملحوظاً في الأشهر الأخيرة، ومن المرجح أن تواصل أداءها الإيجابي في الفترة المقبلة بنسبة تراوح بين 10  و%20
وتوقع المدير التنفيذي في “هاربور” العقارية، مرور السوق العقاري في دبي بفترة جديدة من التعافي وتجديد الثقة، حيث سيتقبل السوق المعطيات والديناميكيات الجديدة للقطاع، وسيكون هنالك تقبل عام للأسعار والمعدلات الجديدة للعقارات
كما يتوقع أيضاً أن يستمر تدفق السيولة في سوق العقارات بسرعة ووتيرة أكبر . ولقد بدأت شركات التمويل العقاري والممولون الاستثماريون بزيادة نشاطاتها الإقراضية مرة أخرى . وتعد هذه خطوة إيجابية للغاية وستشجع مزيداً من المشترين الذين يرغبون في الاستفادة من الفرص العقارية المتوافرة
وبين مؤشر “بيتر هومز أنَّ أسعار إيجارات الفلل، التي تتكون من 3 غرف في منطقة المرابع العربية، وصلت إلى 186 ألف درهم، وفي مجمع دبي للاستثمار إلى 215 ألف درهم، وجميرا بارك 207 آلاف درهم، وفي مردف 115 – 250 ألف درهم، وجزيرة النخلة 350 ألف درهم، بينما وصلت إيجارات الفلل، التي تتكون من 4 غرف في منطقة المرابع العربية، إلى 285 ألف درهم، وفي جزيرة النخلة 486 ألف درهم

ASK THE AGENT

 

mrmohanad

I own a third of a floor of office space in Business Bay, with two other parties sharing the balance of the floor space. We are having difficulty in finding reputable tenants at a reasonable lease rate. Can you offer any advice?

The issue of multi-strata ownerships, particularly when looking at office space, would be a concern as prospective tenants do not want to negotiate or deal with multiple owners.

One solution requires the willingness and commitment of all owners to form a type of cooperative or rental body. Under this concept, the owners would commit their space to a “rental pool” to offer to prospective tenants. This pool would be managed  by a third party appointed by the owners so that tenants requiring space owned by more than one person would be dealing with one central body representing those owners, and all owners benefit from the rental receipts garnered from leasing “pool” space.

This concept requires commitment, discipline,participation and cooperation from the owners, but if implemented with full owner support, will provide superior returns in an office market that is currently extremely competitive.

 
Would an asset bubble be reappearing in the Dubai real estate industry?

The recovery has been created by a number of market factors and catalytic events, the Expo 2020 bid win notwithstanding.

Confidence has returned to the emirate as solutions to debt issues have been identified, we have a booming tourism industry, and a geo-political position which has been a prime attraction to capital fleeing troubled regimes around the region. Seeing this, you will understand why demand would be accelerating in a post-recession world as these fundamentals all add up to a compelling case for investment.

Do you think more affordable segments of the market offer any investment opportunities?

Definitely. While the greatest growth in the Dubai real estate recovery has been seen in the middle to high-end villa and apartment segments, there will be an increasing requirement for housing at the affordable end of the spectrum.

An investor taking a long-term view when creating a property portfolio will recognize that there is tremendous value promising extremely healthy returns in the affordable segments as demand will only increase as Dubai’s economy continues to grow.

Already, apartments in developments such as Skycourts, JLT and MotorCity have witnessed substantial capital appreciation, while villas in areas such as Dubai Silicon Oasis have appreciated significantly as well.

While it may be glamorous to invest in the more luxurious or iconic locations, sometimes it’s just as lucrative to invest in the lesser known and more affordable developments.

I have been considering taking advantage of the low office rental rates and relocating my business. Do you believe rates have bottomed out?

The office segment in Dubai has definitely bottomed out, and there are instances of rental growth emerging in some areas such as DIFC and in some space
configurations.

For example, there is a relative shortage of Grade A,large floor- plate, single owner space. This type of space is favored by larger, often multinational companies and, with Dubai’s economy rebounding strongly, demand for this type of office space has been growing rapidly.

Vacancy rates outside the CBD/DIFC area are still quite high. In developments such as Business Bay, many buildings are suffering from fragmented ownership and configurations issues. However, depending on your size requirements, you may still find space that suits your needs at reasonable leasing rates.

 

Question of the Week

My apartment is finally ready . When I stated that I would like to inspect the apartment , the developer said they had already completed their inspection , and I would be wasting my money as they believed the apartment to be satisfactorily finished . Is this right ?

Technically, once an official Completion Certificate has been issued for the building by the Dubai Land Department (DLD), it is deemed ready for handover and your contractual obligations regarding transfer of ownership remain.Nevertheless, I doubt if the developer has your best interests at heart in this instance.

You have the right to inspect (snag) your apartment, and report any legitimate issues to the developer for rectification. Items which can be remedied in the short term should be fixed immediately; and remember, once you have taken ownership of the apartment, the developer is obliged to fix any issues that may arise for a full twelve months following the transfer of ownership.

It is in your interests to snag your apartment, and I strongly recommend you engage a professional to do this on your behalf. There is a good chance that it will save you a substantial’ amount of money in the long term and provide you with some peace of mind.

Expert Eye – 5 reasons to invest in real estate in 2014

 

mrmohanadEconomic recovery, including in UAE, is definitely gathering steam globally

As many of us have gotten into the rhythm of life in 2014, it’s time to look at what opportunities exist to ensure that we continue to improve our financial situation this year.

While financial advisors will have opinions on which equities, funds or fixed income instruments in which markets around the world will offer the best returns, most people need look no further than their own neighborhood to spot some pretty interesting wealth – creating opportunities.

There are a number of reasons .to invest in Dubai real estate in 2014, but I will focus on just five of them.

First: The market is ben­efitting  from a bow wave of demand as the broader economy stages a strong recovery. Granted, prices have been growing generally at around 20 + % YoY, more in some areas, and there is renewed concerns regarding asset values. But remember, some areas lost around 60% of their values from the highs of 2008. The recovery has been underway for two years now, and the market is still around 22%, shy of the highs reached five years ago.This would suggest the market still has some way to go before a broad-based major correction occurs.

Second: it is not just Dubai which is recovering. The global economic recovery is definitely gathering steam bolstered, of course, by ever-increasing confidence that the long-awaited US economic recovery is well underway. One side effect of the inevitable reduction in quantitative easing in the US has been the strengthening of the US dollar and, therefore, the U.A.E dirham. For expat investors, the opportunity of a nice currency hedge emerges while local investors will benefit when looking to invest abroad with a strengthened dirham.

Third: When you invest in real estate, you are really investing into an economy, and the effect of the 2020 Expo on the U.A.E economy cannot be underrated. For real estate, hosting the World Expo will provide additional impetus for the industry to enjoy continued growth. The last city to host a World Expo was Shanghai in 2010. Despite being held during the worst global recession in history, property values grew in excess of 60% in the 12 months before the event was held. While Dubai is unlikely to achieve such stellar value growth, the predictable surge in demand for accommodation and commercial space of all types, from labor camps to offices, to warehouses to apartments to executive villas, is sure to have a significant effect on property values.

Fourth: The increasing levels of governance, oversight and scrutiny that the industry is experiencing are driving confidence back into the industry. The ongoing development of the industry’s regulatory framework and implementation of laws and regulations to safeguard both consumer and investor interests, the overall industry and the economy at large from rampant and irresponsible speculative, predatory or unethical practices, reveal a mature and balanced approach to shaping an industry which exhibits sustainable growth over the long term. The free-for-all days of the past are long gone; and investor, not speculator, confidence has been making a big comeback.

Fifth: And finally, if it’s superior yield with minimal capital outlay that you are after, it is hard to ignore Dubai real estate. Affordable properties in developments such as Dubai’s Skycourts, International City, Dubai Sports City, Discovery Gar­dens and JLT are all benefit­ting from Dubai’s recovering economy, and you can expect a rental return in these areas of at least 7% with 10°% rental yields not uncommon. Demand is being driven mainly by first home buyers and investors seeking the increasing yields on offer and both rental yields and property values are expected to increase as the 2020 World Expo draws nearer. Given the relatively low cost of entry, the opportunities that reside in the more affordable end of the market are becoming more lucrative every day.