I am considering buying property to offer for rent. I am looking at two similar offers, one of which is located within 150 meters of a metro station, and offered at a premium of around 8 percent. Is this reasonable?
Let’s first look at why property situated close to the Metro can command a premium.
It’s all about convenience. cost and lifestyle efficiency. Your prospective tenants can enjoya cost effective. fast. comfortable and reliable mode of transport to either travel to work. visit friends or even do some light shopping. No traffic hassles. road works. parking. and wear and tear on the family car while the requirement for a secound family car is diminished. Many tenants are prepared to pay a rental premium for property which allows them to enjoy these benefits.
Our studies have shown that properties located within a.5 kilometer radius of the Metro in Dubai can command between a 6 percent to 11 percent premium when compared to similar properties with no feasible ambulatory access to a metro station.
I was impressed with the Mohammed Bin Rashid City display during my last visit to Cityscape in Dubai. Do you have a point of view regarding the likely success of this development?
You are not the only overseas visitor to express interest in this amazing development. It is easy to be impressed with the concept. scale and enormous potential of the development. The concept is centered on family tourism. courtesy of the largest family leisure and entertainment complex in the Middle East. Africa and Indian Subcontinent. developed in collaboration with the Universal Studios. and supported by more than 100 new hotels.
There will be an extensive retail and cultural presence along with special focus being provided to entrepreneurship and innovation. and it is located within convenient proximity to three ofthe four BRIC economies. and on a major tourist route between the East and West. and the Northern Hemisphere and Southern Hemisphere. The market for such a wonderful attraction is enormous and. as recent ‘ears have shown. Dubai knows how to do tourism .
With prices increasing rapidly in Dubai, does it still make sense to invest or wait until things cool down a little?
A property investment requires the same approach and set of considerations regardless of the state of the mnarket. Be very clear as to what your investment expectations are and be sure to plan for the long term.
Know what you can afford. If you have the cash. I suggest you pay for it outright; however. don’t be afraid to take out a mortgage if need be.
Finding the right property can be a challenge.Think carefully about location. surrounding infrastructure. construction quality. developer reputation and building amenities. Properties which are close to the beach. with a sea view. a golf course view or part of an iconic development such as Downtown Dubai usually provide good returns. If you have close access to the Metro. even better.
You also need to consider the effectiveness of the owners association. service charges and the quality of maintenance services as these will have an effect on the long-term value of your investment.
A lot has been made of the Investor Protection Law. I am considering buying a property but I’m still nervous that, as an expat, my legal rights aren’t what they should be. Are expat investors well-protected by the law?
Lawmakers in Dubai have been working very hard to introduce laws that better protect investor rights. and standardize and clarify the relationship between developers and investors.
There has been a lot of progress made in providing protection to investors in a variety of areas including the introduction of escrow accounts. Strata Law governing the introduction and operation of owners associations. stipulations regarding recourse where delays in the handing over of projects changes specifications of properties. defects and any material departure from the contractual provisions has occurred.
Investor protection is one of the fundamental critical factors in driving sustainable profitable growth for the industry.
Question of the Week
With recent increase in property values , I am considering selling my 2 BR apartment in JLT . Do you think I should sell now or will my apartment continue to increase in value?
I am assuming that your unit is in a good building in Jumeirah Lakes Towers. and that it is well- maintained with a good tenant.
JLT has performed well over the last 18 months with value increases of around 25 percent not unusual. Rents have been rising also so your cash income should have also risen over that period.
However. I wouldn’t rush into selling just yet despite the recent upswing! Real estate is a long-term game which revolves around cycles of approximately seven to nine years.
In our company. we believe that the market has at least another two years of solid growth. and I believe the property still has a bit left to offer you financially.
If you have identified an alternative investment give you a better income stream and capital return than what you expect to receive in the next two years. then the right decision may be to sell.
However. if you haven’t identified a better alternative. I recommend that you hold on to the property as I believe that you will receive at leas a 6 to 7 percent net rental return. and achieve at least a 7 percent per annum capital growth in the next two years.