Ask The Expert

Retirement home

I am thinking of buying a villa in The Villa project to live in. What do you think of the community and my decision to purchase?

The community is one of the best in Dubai. Amenities include a mosque, nursery, playground, community centre and a new tennis academy. A major supermarket has just been completed and plans are under way for the construction of a new health club. Shopping is easy with Dubai Outlet Mall only ten minutes away, Mirdif City Centre 15 minutes and the Dubai Mall just 20 minutes.

As for purchasing a villa, I would recommend The Andalusia Collection as these villas are renowned for their uniqueness in design, levels of grandeur, quality and value. it boasts some of the biggest plot sizes in The Villa project while the villas themselves have high quality features and fittings from some of the world’s leading brands such as Villeroy and Boch, Grohe and Bosch.

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. On offer now are villas with a built up area of 8,400 sq ft and plot sizes ranging from 15,300-30,300 sq ft. All the villas will have provisions for smart home systems with security applications, as well as surveillance and audio distribution systems.

I have a mortgage on an apartment that I live in and I happen to have some cash currently. Should I settle my loan or invest the cash elsewhere?

It all depends on what interest rate you are paying on your mortgage. And what return you could expect if you invested elsewhere.

If you can achieve a return greater than your mortgage interest rate, then you should invest the cash elsewhere and take advantage of your low mortgage rates.

There are some very attractive mortgage products in the marketplace, with a few providers offering rates as low as 3.99 per cent or even 3.49 per cent. If you have a mortgage with such a low interest rate, it will not be too difficult to find an investment that will yield in excess of your mortgage rate.

For example, you may consider investing in a property such as an apartment that will yield you a net annual cash flow of 5 per cent and, over a period of five years, an annual capital appreciation of anywhere between 5 and 7 per cent. This would be a more lucrative allocation of your cash.

lf, however, you are not confident about achieving a return on your cash that exceeds your mortgage rate, then I suggest you pay off your mortgage as you will save the interest costs.

I am currently planning my retirement and have been looking at Dubai as a possible part time retirement destination. I would like to purchase a property, rent it out initially but eventually use it myself during my retirement. Do you have any advice?

Many people include property as part of their retirement plan. The key to choosing your property is determining the right balance between the amount to be invested, the returns you require in the interim period before you retire, and what type of property you want to live in after retiring.

As the property will eventually be for your own use, you need to determine what you will enjoy in your retirement. The good news is your tastes are likely to be shared by your tenants in the interim, so renting should not be a problem. Quality properties are available starting at Dh700 per square foot. However, if you want to purchase in the prime areas of Dubai – either downtown, close to the beach, or with a golf course view – you can easily double or triple that amount. The choice is amazing and getting what works for you is certainly achievable.

You can expect a minimum net rental return of around 5-7 per cent, which, given the cheap financing available at the moment, makes for a solid investment in preparation for outright ownership and retirement. Be careful with fluctuations in exchange rates.

You will require a reputable local real estate professional to help you with factors such as location, developer’s record and reputation, quality, service fees, building management and the existence of a functioning owner’s association to minimise any risks connected to your investment during procuring as well as managing it until you are ready to move in.

Can you describe the property characteristics that I must pay close attention to in order to minimise any risk related to my investment decision?

The first factor to consider is location as it can drive up to 90 per cent of the property‘s value. Established and prestigious locations such as The Palm Jumeirah, Downtown Dubai, Dubai Marina and Jumeirah Beach Residence fared extremely well in the post global financial crisis period, and secondary, more affordable areas such as Jumeirah lakes Towers, The Greens, Dubai Sports City, Discovery Gardens and Dubai International City followed suit.

But there are other factors as well. Quality of product, maintenance services and infrastructure, as well as the extent of completion are now playing a big part in investors‘ decisions.

With plenty of supply at the beginning of the recovery, buyers could demand, seek out and purchase the best of what was on offer, and the realisation of the importance of these factors has remained a key learning for most investors.

Value for money and superior return on investment are also some things that you need to consider closely.

In the post-recession era, the chase for yield. Along with an increase in the level of critical assessment of true values, has meant that properties offering more in way of physical product and potential rental returns arc attracting greater attention.

Current and future supply levels of various asset types need to be examined, and you should consult a reputable property broker to assist you in this. For example, villas, as an asset type, across the board have out-performed others because of supply shortages. However, looking at the inventory pipeline, this may not be the case in the future with more affordable properties likely to be in higher demand.

One thing we have learnt from the recovery is that the fundamental drivers of market values remain location, product features and benifits, quality, as well as demand and supply.

I Rents in our building have been rising significantly as new tenants took up residence. We will need to renew our contract soon and are anticipating an Increase. Can you describe the regulations covering this issue?

Authorities have addressed this particular situation, which is fairly common, to give you some protection. For a start, your landlord needs to give you notice of at least 90 days prior to the expiry of your contract if he wishes to increase your rent. You should familiarize yourself with Law 43, which was issued on December 22, 2013 and replaced Decree 2 of 2011. It introduced the following restrictions (summarised) to take immediate effect with regard to the calculation and implementation of legal rental increases:

  1. There should not be any rent increase, if the rent for the real estate unit is no more than 10 per cent below the average rent that a similar property commands within a neighborhood.
  2. The annual rent hikes, as specified by the decree, can range from 5-20 per cent, according to how much the current rent is less than the market average.
  3. The market average rates are to be determined by the Real Estate Regulatory Agency (Rera) Rent Index (Rera Rent Calculator)

The implementation of Law 43 is necessary to safe guard consumers’ interests, the overall industry, and the economy at large from rampant and unjustifiable rental increases on existing contracts. It does not set out to control the rent in new contracts and where a property is to be let for the first time or to a new tenant. It is up to the owner and prospective tenant to agree on the rent.

I’m looking to rent a house but I found that it has district cooling. Coming from overseas, I am not too familiar with this type of cooling. Can you explain the advantages and pit falls please?

District cooling for the provision of chilled water has emerged globally as a way to provide cooling to buildings in a more environmentally sensitive way. It is considered to provide great benefits in the long run and, in addition, helps in saving on the costs of electricity, which will be reflected in lower Dewa bills for tenants.

You will find that most of the units that are serviced by chilled water district cooling are offered at slightly lower rental rates. However, you should enquire about all the charges included in the cost as well as how they are calculated. You may even ask current tenants how much they pay before you decide on signing the contract.

With regard to consumption charges, I assume you have a BTU meter installed in your apartment. If so, you will be billed directly by the cooling services provider based on what you actually consume in terms of cooling. The more you use, the more you pay.

However, the Dewa savings will be somewhat offset as you may incur an additional utility charge. Some owners may pass to tenants the slightly higher charges they incur, which involves the remuneration of the capital costs of providing the infrastructure that delivers the chilled water to the unit. This charge will, in all likelihood, be proportional to the actual consumption charges.

Nevertheless, in most cases developers have managed to offer better value for money while being environmentally friendly.

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