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

Economic 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.

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