Ask the agent

Question: Which would be a better investment, buying a townhouse or an apartment?

This is a common dilemma faced by investors in the residential market. In the UAE where there is a great deal of variation in the properties on offer, making a choice becomes all the more difficult for those who are new to property investment.

Just remember that the market rarely moves uniformly. There is always a difference in the investment returns to be expected from different asset types, in different areas, at different stages of completion, over different periods of time, being completed by different developers.

So in today’s market, knowing what we know about Dubai’s economy going forward, I usually recommend to my clients to invest in affordable apartments or construct a portfolio of affordable apartments and townhouses, and even villas, as the case may be.

But do take note of the keyword here which is “affordable.”

Projects in Dubailand like Queue Point in Liwan and Skycourts are filling the affordable housing void and, if you wish to diversify asset types, I suggest you consider Shamal Terraces in JVC as this recently launched project offers very high quality but reasonably priced and extremely spacious modern townhouses.

Properties in the above communities offer good quality affordable solutions with little compromise and have the potential to provide excellent rental and capital appreciation returns as affordable housing will continue to be in high demand going forward due to the demand for such options among the middle and lower middle income segments in Dubai.

Question: I am interested in working for a real estate broker as I have extensive property experience in North America, but I don’t know which company to join. Can you please advise me on how I can find the best company to work for?

It appears that you are confident in your industry experience, and feel you can be a real asset to the company you will join. However, since the UAE market is also unique while sharing some general characteristics with global real estate hubs, I suggest you join a company that will enable you to fast track your learning and mastery of the UAE property market. Make no mistake, you still have a lot to learn; but having a good solid foundation of real estate principles should help you progress with greater speed.

Try to go for a full service company so that you can gain a greater understanding of what the local real estate business is all about, who the key players are, and the procedures you need to be familiar with.

The company you choose should value you as an individual and remunerate you appropriately. But they should also be prepared to invest in you by providing the types of learning experiences that come with formal training (mandatory to become a licensed agent in Dubai) and also in-house training. This may involve being assigned to a mentor, being placed on an internal rotation scheme to enable a broader knowledge of the business to be developed, or being given special projects that will facilitate your learning by encouraging you to seek answers and solutions yourself to enable you to complete the task at hand. Those companies that invest in high potential people are the ones that typically succeed.

Finally, it is very difficult to be passionate about your chosen profession if it is not part of the culture of the company that you work in. Try to surround yourself with people who are passionate about the industry because passion is contagious and it is what sets champions apart.

Question: I want to give my tenant one-year notice to vacate the flat. Is there a format and any other formalities? I sent him a notice through a courier company but he said it is not valid. Do I have to give it through the court?

You need a valid reason for requesting the tenant to vacate the premises. Is the tenant in breach of the tenancy agreement? Has the tenant broken the law by utilizing the premises for an unlawful purpose? Do you want to sell the property or occupy it yourself?

If your tenant is in breach of the tenancy agreement or has broken the law in some way, you must serve a 30-day notary public notice to the tenant. The notice must clearly state why the tenant is being given 30 days’ notice to fix the matter, and the details of the matter itself.  If the tenant does not respond in accordance to the request, then you can the landlord go to the Rental Dispute Settlement Center and request an eviction order.

If you want to sell the property or use it yourself, you will need to provide 12-months’ notice to the tenant through the notary public stating your intentions.  You may then refuse to renew any lease for a period that extends more than 12 months past the date of notification.

The notice should be delivered by courier, and it is important to keep record of the delivery report as evidence of receipt by the tenant as you may need this if the tenant refutes receiving your notice.

Question: Are we headed for another recession?

Even as there is an ongoing market-wide slowdown in real estate activity, my answer is NO, I do not believe that we are going to witness a crash any time soon. However, real estate price correction has been taking place which is not necessarily a bad thing.

The market has cooled for a number of reasons. For starters, the capital inflow that was extremely strong during the initial part of the recovery has started to slow down after reaching peak gains late in 2013. Capital is not an infinite resource, and will ebb and flow in accordance with supply and alternative investment.

Also, a number of structural changes have also started to crimp demand. The implementation of the 4% transfer fee, the implementation of new mortgage laws and new laws regarding rental price increases have also had an effect.

Although some people share a negative outlook on the way things are especially with the slower GDP growth compared to last year, for a country to be considered technically “in recession,” it has to experience two consecutive quarters of negative economic growth reflected in its GDP – which is definitely not the case with the UAE.

And given the history of the Dubai real estate market in the run up to the Global Financial Crisis and the dramatic, now infamous, sudden rise and then sharp decrease in asset values that occurred during the crisis, it is not surprising that some industry stakeholders have become nervous about the current state of affairs. While this point of view is understandable, Dubai 2015 is definitely not in the same position as it was in Dubai 2008.

Additionally, the UAE government, acting with strategic foresight, has Vision 2021, UAE’s long-term economic plan launched in 2010, which prioritizes the diversification of the country’s economy thereby reducing UAE’s dependence on hydrocarbon assets.

Question: 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 the low mortgage rate you will be getting.

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

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

If, however, you are not confident in achieving a return on your cash that exceeds your mortgage rate, then I suggest you pay down your mortgage outright as you will save on interest costs.



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