Ask the agent

mrmohanadI have properties in Dubai Marina and Downtown Dubai and wish to acquire more. What areas in Dubai will have good investment potential?

Given that you are already exposed to the more upmarket areas, I suggest you use your next investment activity to diversify your property portfolio. There are some lucrative opportunities in the affordable housing segment which stand to benefit greatly from Dubai’s well-chronicled economic and population growth over the next five years. I suggest you look at the apartments in Queue Point in Liwan, Skycourts, Ajmal and Windsor Residence located in Dubailand. lf you.wish to diversify asset types, consider the recently launched Pacific Village located adjacent to the renowned The Villa Project, City of Arabia and Falcon City of Arabia. This project offers high quality, spacious villas and townhouses. All the above recommendations will provide you with good rental and capital appreciation returns.

We’re a family of five with three dogs relocating from New Zealand, with UAE work to be based in Business Bay. Which villa communities would you recommend for people like us?

You need not look further than The Villa Project. An easy 20-minute commute to Business Bay, it offers affordable and spacious living within a secure gated community complete with 24-hour security. The project was designed and inspired by Spanish architecture and is ideal for family living. It offers affordable free-standing 4, 5 and 6-bedroom villas set among lush and expansive landscapes ideal for exercising your dogs, and is located within easy driving distance from some leading schools. Amenities include a mosque, children’s nursery, playground, a community center and a new tennis academy. Spinneys s currently under construction and plans are underway for a new health club. Shopping is not a Issue with Dubai Outlet Mall only 10 minutes away, Mirdif City Centre 15 minutes away and The Dubai Mall 20 minutes away.

I heard about the Andalusia Collection at The Villa Project, can you please tell me what makes these villas more special when compared to other villas within Dubailand?

The Andalusia Collection consists of 69 ready-to- move-in premium limited edition villas renowned for their unique design, levels of grandeur, quality and value. It boasts some of the biggest plot sizes while the villas have been fitted with high quality features and fittings. Other features include marble flooring, designer staircases, an overflow swimming pool, decorative fencing, a fully enclosed and air-conditioned central courtyard and unique Andalusian archways connecting large living areas, some adorned with wooden beams. The project has proven very popular.lf you are interested in owning one, you better hurry because they are as popular as they are rare, and they are currently being offered with a 3-year in- house payment plan for a limited period.

I would like to buy an apartment for investment purposes. Do you advise I buy in the main areas of Dubai or should I consider the projects located in the outer rings of Dubai?

I suggest you consider the more affordable areas. Properties in International City, Dubai Sports City (DSC), Discovery Gardens and JLT have benefitted from a “trickle down” effect as the market has recovered and more people are now seeking more affordable accommodation. A wide variety of apartments in Skycourts and DSC achieved YTD average growth of 20.5%, 23% and 21%, respectively with demand being driven mainly by first-time home buyers and investors such as you. International City and Discovery Gardens have shown a 23% and 26% increase in rental income since the 3rd quarter 2012, respectively. I also suggest you check the apartments in Queue Point in Liwan, and Ajmal and Windsor Residence in Dubailand. They are all expected to perform very well going forward as the demand for affordable properties continues to grow.

Question of the week

How do I select the best real estate broker to represent me in buying my family home in Dubai?

For you, the homeowner, there are many considerations to take into account and what follows are just a few things to watch out for.
Look for an experienced and passionate team. The best way to find such is to ask around. Seek out friends or peers who have recently conducted a real estate transaction and listen to the positive as well as negative stories.

Look for an agency that exhibits breadth and depth of industry knowledge and expertise. Where conducting initial meetings, make sure you assess how much the agency or its brokers actually know.

Look for longevity. Those that survived the recent recession must be good.

Seek an agency with a strong network of contacts. Agencies with good relationships with key industry stakeholders such as major developers or authorities such as DLD, RERA. DEWA or the Economic Department will be able to operate more efficiently and effectively.

Finally, look for an agency that has received some form of industry or peer recognition. These are the hardest plaudits to get.

 

Expert Eye

111Managing your property portfolio

Nurture your portfolio to ensure its potential and capabilities are achieved.

I recently had a meeting with one of my long- standing clients. As the owner of a portfolio of several villas and apartments purchased early 2011, the past three years have been extremely lucrative for her, and her success is well-deserved given the astute and well-considered decisions she has made along the way.

The topic of the conversation was whether to sell her property assets as the market slowed in the first half of 2014. Rather than make a hasty decision, I offered to perform a thorough review and recommendation for her consideration and eventual decision.

An easy decision would be to sell my client’s. entire portfolio for a substantial profit close to 70% , but the question remained, where should her newly gained wealth be invested? There was no answer as there was no plan.

Looking at the issue more closely, we found that by retaining her portfolio, my client would continue to receive an average of 6.2% nett rental returns per annum on the adjusted value of her properties over the next five years. Notwith standing the recent cooling of the market, we estimated that she could expect, on average, a capital growth of at least 6 per annum over the next five years for an estimated nett total return of 12% per annum, a return we consider conservative.

The review included careful analysis of current maintenance requirements, market factors, regulatory developments, industry forecasts and trends, alternative opportunities, risk factors and the likelihood of relevant future events.

When I asked her what alternative investment could provide the same return without taking on greater or excessive levels of risk, she could not identify any.

The example of my client clearly illustrates that now, more than ever, property portfolios require very careful management. We all know the market has cooled. This is hardly a surprise as it was clearly impossible for Dubai’s property assets to continue to grow at an average rate of 30% per annum as they did in 2013. Various estimates of price growth for apartments from January to June 2014 range between 3.0% and 5.0% in established areas, while villas in the more iconic locations have experienced similar reduced levels of price growth. Meanwhile’, secondary locations enjoyed healthy, albeit slowing growth rates in the 6% to 9% range. Despite price growth being significantly reduced from levels experienced in 2013, there is hardly a need to panic as the residential market is clearly on a path to deliver a sustainable and acceptable 7% capital growth going forward.

Investing in property has a very simple purpose: to create wealth in the long term. However, your property investment portfolio needs to be nurtured, maintained and managed to ensure its wealth -creating potential and capabilities are achieved as it rides the inevitable cycles.

Not everybody has the time or is comfortable with managing a portfolio. However, there is expertise available to help you and you should consider engaging a good property manager who will ensure that you maximize returns from your property portfolio and enable your long-term strategy to be realized.

Delivering the strategy will require an activity plan addressing pricing and marketing,resourcing, customer relationship management, tenant management and policy, cost management, maintenance supervision, communications and review schedules, status reporting and financial statements. It should also comprehend the inevitable cyclical nature of the industry.

Think of your investment as your business, a business that will be affected by many different factors and events.Proper management is essential, and you need to en-sure it is in good hands providing you with the returns you expect with as little hassle as possible.

Professional Speak

mrmohanad

Addressing what the market really needs

Oft heard in the UAE in daily real estate related conversations in transit, at work or on the street, is the question: why aren’t developers working on projects for the low to middle income segment of the population? The answer seems to be simple enough for some: there’s no money in it. How ever, going beyond the ROI objective, Mohanad Alwadiya of Harbor Real Estate talks about welcome changes in the property market that ad- dress the needs of the low to middle income group.

Logic behind ‘location’

Location is the primary consideration of any real estate practitioner when appraising property. The importance of location cannot be underestimated because it is a prime determinant of property value which is usually derived from the levels of life style convenience, pleasure, harmony, security, future economic value or even status that can be derived from the property. Be it an outstanding view or proximity to dining, entertainment and business districts, or access to schools, hospitals or public transport, or being neighborly with some celebrity types, the perceived benefits that a location may bring to a prospective buyer can account for up to 90% of a property’s value.

The importance of location is a global truism, and in Dubai, it is no different. Locations close to the beach and entertainment areas such as The Palm, Dubai Marina and JBR will command a location premium as will properties close to or within Downtown,CBD or DIFC. Properties with ocean views or overlooking golf courses such as The Greens always command a premium as most potential buyers consider a view to be a key feature of their home.

The decision to build particular types of properties in particular locations will be driven by the objective to maximize the economic value of the development.

Property for low to middle income segment

The number of developments that will supply housing affordable to the middle and lower income segment is definitely increasing. Established developments most associated with filling the affordable housing gap were International City, Discovery Gardens and MotorCity. But there have been recent additions that have provided realistic alternatives to older developments, and several more to come.Most are located in the Dubailand/Dubai Silicon Oasis areas.

Skycourts has been a huge success in providing a superior quality lifestyle to lower and middle income earners in a well-managed community. Queue Point is currently being delivered to owners, providing a generous mix of spacious apartments and outdoor spaces, and good access to all Dubai districts and neighboring emirates. La Vista Residence, with its modern design, great range of amenities and good location in the ever-developing DSO community, offers. comfortable yet affordable living.

Changes needed to sustain and support growth

Developers have misread the future segmentation of the Dubai real estate market. Past performance may not be a true indicator of future events; however, learning from the past can eliminate the repetition of mistakes. Unfortunately, many developers have looked at property concepts and specifications that were historical successes but failed to address the fundamental question of what will be needed in the future. As a result, the Dubai market became somewhat “top – heavy” with offerings only the upper middle class and wealthy could afford. People decided to reside in affordable emirates like Sharjah and Ajman.

As the economy of Dubai develops and grows, it will experience many changes in the various components that help make it function. One of these will be the composition of the population that provides the intellectual capital, expertise and man power that, without which, the economy would stagnate or :regress. A natural occurrence is that its middle and lower-middle income segments will expand to support the rapid rise in commercial activities and economic initiatives. Some astute developers identified the future opportunity to provide housing for this burgeoning segment while others chose to rely on old formulae.

I believe the more astute developers have now awakened to the need and opportunities that affordable housing provides. Many have learnt that it is pointless building mansions if there is no one to occupy it. They just become monuments.

New affordable location in Dubai

• Skycourts – it has enabled many to purchase their first home and demonstrated that housing can be made affordable and still provide an enriched lifestyle

• Queue Point – the development is of high quality at par with international standards and, while commanding a purchase price of Dh750 per sq .ft., represents great value in today ‘s market

 
•La Vista Residence – with two-bedroom apartments available from Dh39, 000, this community truly represents amazing value

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 aH 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. e have a booming tourism industry. and a geo-political position which has been a prime attraction to capital fleeing troubled egrnes around the region. Seeing this, you will understand why demand would be accelerating 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 (OLD). 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.