Property investing in 2017… many alternatives

There are many alternatives for the property investor in today’s market. Here are just a few of them and why I think each presents significant opportunities to increase my client’s wealth.

Affordable housing

The affordable housing segment in Dubai has outperformed its more luxurious alternative for some time now and continues to show lots of promise. Affordable properties will continue to be in high demand as Dubai’s population growth gains momentum during a period of expected strong economic growth leading up to the end of the decade.

Examples of affordable projects that are providing good rental returns and expected capital appreciation are the Skycourts project and the adjacent QPoint project. Apartments in Skycourts have proven to be very popular with tenants and investors alike and have historically delivered excellent capital growth with some apartment values growing by 20 to 25% % in the 24 months leading up to the correction and shedding no more than 5% reduction in values during the correction with rental premiums of at least 7% not uncommon. Purchasing an apartment at Skycourts has been made even been made more affordable with the developer offering units, some with existing and reliable tenants, with a very attractive easy payment plan. QPoint is also providing rental yields of 6% to 7% and has also showed strong resilience in losing minimal capital value during the correction.

And while the value is irrefutable, he risks associated with investing in the affordable segments of the industry as opposed to the luxury segments are much lower. Demand for this type of affordable accommodation will continue to grow as Dubai’s population swells in the run up to the Expo and the demand for well-located affordable housing increases. As Dubai grows, so will the need for affordable housing.

Hospitality

The rise of Dubai as one of the world most preferred tourist destinations is a remarkable story. Tourism and associated commercial activities are flourishing in Dubai and the focus of investment has been on new projects to grow these important revenues generating economic segments and further diversification. The launch of 2 major theme parks in 2016 will ensure Dubai attracts over 15 million visitors in 2017, continuing a growth trend of approximately 10% per annum since 2010 and is well on track to attracting over 20 million visitors in 2020 with continual investments in infrastructure and attractions expected to generate 25-30 million tourists annually to the emirate by 2030.

The local market offers significant opportunity. The GCC, with a total population of just over 40 million people, has one of the youngest populations in the world. Approximately 50% of the population on the Arabian Peninsula is below 25 years of age. What a wonderful opportunity this represents for Dubai. The possibility exists for the construction of the only mega family entertainment destination in over 2,500,000 square kilometers of territory. From an economic point of view, the provision of memorable entertainment experiences for the youth and families of the region must have a multiplier effect on the economy.

Offices

All things being equal, offices in today’s market can provide an ROI significantly greater than that of residential properties. This is mainly due to lower per sq. ft. capital cost but also reflects the higher levels of risk associated with owning this type of property.

Managing tenants is also more straightforward. You will have a business-to-business relationship with your tenant and many of the emotional issues which can complicate residential leasing arrangements won’t exist. It’s easier to keep interactions professional and focused and relationships are built over time with the opportunity to attract a ‘blue chip’ tenant and are likely to rent your property for a long period and less likely to default on rental payments. In many cases, office tenants and property owner interests are aligned. The tenant wants an efficient operation which presents a favorable impression to his customers, business associates or peers and, in this way, is more likely to assist the owner maintain or even improve the property.

Establishing a true value of the investment is often easier with commercial property. Reviewing the current owners’ income statement and existing lease details will provide a good indication of the likely future cash-flows and help to establish an accurate valuation. Residential properties are often subject to more emotional pricing or developer inefficiency and cost recovery considerations.
In addition to lease rates and periods, negotiations can include such items as provision of fit-out assistance, maintenance, implementation of office and storage systems, insurance, lease to buy provisions and options … the list goes on. The variations are countless.

Labor Camps

One alternative that is not considered very often is the ubiquitous labor camp. Dubai is going through a high construction phase with a growing requirement for construction labor. Demand for this asset type has been very strong and continues to grow. Yields above 15% are not uncommon and by selecting the right tenant, longer term contracts can be negotiated. This investment is certainly worth consideration when economic activity is expected to increase or remain strong for extended periods of time.

Commercial property investment

The majority of my clients are comfortable with investing in residential property because most have rented or bought a property for their own use and therefore understand what that experience entails. However, very few have actually had a similar experience with commercial property and, therefore are a little less confident in investing in this potentially lucrative segment of the market.

So, why consider investing in commercial property?

Commercial property can add diversification to a property portfolio. Segments within the Real Estate market rarely move in tandem and a mixture of residential and commercial property can make an overall portfolio more resilient to inevitable market cycles.

All things being equal, commercial properties generally produce an ROI at least double that of residential properties. This is mainly due to lower per sq. ft.capital cost but also reflects the higher levels of risk associated with owning commercial property.

Managing tenants in a commercial property is also more straightforward. You will have a business-to-business relationship with your tenant and many of the emotional issues which can complicate residential leasing arrangements won’t exist. It’s easier to keep interactions professional and focused and relationships are built over time with the opportunity to attract a ‘blue chip’ tenant and are likely to rent your property for a long period of time and less likely to default on rental payments. In many cases, commercial tenants and property owner interests are aligned. The tenant wants an efficient operation which presents a favorable impression to his customers, business associates or peers and, in this way, is more likely to assist the owner maintain or even improve the property.

Establishing a true value of the investment is often easier with commercial property. Reviewing the current owners’ income statement and existing lease details will provide a good indication of the likely future cash-flows and help to establish an accurate valuation. Residential properties are often subject to more emotional pricing or developer inefficiency and cost recovery considerations.

Lease variations abound with commercial properties. The requirements of a tenant operating a high turnover major regional distribution and logistics center for non-perishable goods will be vastly different of those of a tenant who requires refrigerated goods storage to supply local retail outlets in shopping malls. In addition to lease rates and periods, negotiations can include such items as maintenance, implementation of storage and logistical systems, provision of office fit-outs, insurance, lease to buy provisions and options … the list goes on. The variations are countless.
However, there are some possible downsides that the investor should consider.

Let’s use a warehouse as an example. As most commercial leases are of a duration exceeding 2 years, with many being of 5 years duration with options for an additional term of 5 years, it could take some time to find a new tenant for the warehouse. Additionally, your current tenant may vacate due to tough economic conditions. Residential property can be resilient when it comes to economic factors over the long term and finding new tenants is not as difficult.

As the lease for each commercial facility can be negotiated with flexibility only limited by law, owning a portfolio with numerous commercial properties can be time consuming and complicated. You will need professional help if just to handle issues such as maintenance and emergencies. Remember, your clients are in the business to make money and will be relying upon you to address any issues that arise with your property immediately. They, like you, do not want to forgo any revenues or incur any costs because of a problem with the property or premises that you provide.

Purchasing a commercial property of a size that can generate significant cash flow will typically require more capital up front than a residential investment. Also, as the scale or size of the premises can be huge, unexpected repairs or major maintenance items can also be very expensive. This requires careful provisioning for expenses and emergencies when calculating lease rates and free cash-flows for re-investment.

There is a greater array of physical and safety risks associated with commercial properties. Warehouses, for example, are often frequented by trucks, forklifts or other heavy machinery which means damage can be substantial from accidents. Having proper insurance is a must, not only for damage to premises and systems, but also in the event of personal injury or death where you, as the owner, can be held liable. Remember, your investment is actually operating as a commercial venture and can receive high volumes of people traffic.

As usual, greater returns will attract greater risks, however, as part of an overall balanced investment portfolio, there is no doubt that commercial space can be very lucrative indeed.

Published: Gulf News Freehold
Dated: 26-March-2017

٩% متوسط عائد الاستثمار العقاري في الإمارات خلال 2017

يتباين العائد السنوي على الاستثمار العقاري في الإمارات حالياً، حسب نوع الاستثمار، ليتراوح بين 6% و12%، بمتوسط مقداره 9% سنوياً. وتأتي مشاريع التطوير الفندقي في المقدمة من حيث العائد السنوي، تليها مساحات التجزئة، ثم الوحدات السكنية المتوسطة، وأخيراً الوحدات التجارية والعقارات السكنية الفاخرة، بحسب خبراء ومطورين عقاريين.

وبحسب ما نقلت صحف محلية، عن خبراء، فإن انخفاض أسعار بيع وتطوير العقارات في الدولة، بمعدل 10% خلال الاثني عشر شهراً الماضية، تزامن مع انخفاض أقل بمستوى العائدات الفندقية وإيجارات مساحات التجزئة والوحدات السكنية والتجارية، ما يعني ارتفاع متوسط العائد على الاستثمار العقاري بشكل عام.

وأوضح هؤلاء أن تحسن العوائد على الاستثمار العقاري في الإمارات، لا سيما في دبي، دفع المطورين إلى تسريع وتيرة إطلاق المشروعات والاستمرار في البناء، رغم المتغيرات الاقتصادية العالمية التي يشهدها العالم.

ويعد العائد على الاستثمار العقاري من الأمور الرئيسة لاتخاذ القرار الاستثماري في هذه النوعية من المشروعات، ويمثل نسبة الحصيلة الإيجارية السنوية للعقار، محسومة منها “رسوم الخدمات” إلى سعر تطوير أو شراء العقار.

وقالت دانا سلبك، مديرة الأبحاث في شركة “نايت فرانك – الشرق الأوسط” للاستشارات العقارية، إن السوق العقاري المحلي لا يزال قادراً على توليد أعلى عائد على الاستثمار العقاري، مقارنة بباقي الأسواق العقارية في منطقة الشرق الأوسط والعديد من المناطق الأخرى في العالم.

وأضافت أن الانخفاض الأخير في أسعار بيع العقارات خلال الاثني عشر شهراً الماضية، تزامن مع انخفاض أقل بمستوى العائدات الفندقية وإيجارات مساحات التجزئة والوحدات السكنية والتجارية، ما يعني ارتفاع متوسط العائد على الاستثمار العقاري بشكل عام.

ولفتت سلبك إلى تباين نسبة العائد على الاستثمار العقاري، حيث يأتي الاستثمار في مجالي الفنادق ومراكز التسوق في المقدمة، لتسجل هذه العقارات متوسط عوائد سنوية يبلغ نحو 12% من إجمالي سعر العقار أو كلفة بنائه، مشيرة إلى تميز عائدات التجزئة بالاستدامة والاستقرار النسبي.

وأشارت إلى أن القطاع السكني يأتي في الترتيب التالي، مسجلاً متوسط عوائد استثمارية سنوية يبلغ نحو 8%، حيث تحسنت نسبة العائد الاستثماري في هذا القطاع على نحو كبير مع انخفاض كلفة شراء وحدة سكنية واستقرار مردودها الإيجاري.

Published: https://www.alaraby.co.uk/economy/2017/3/25/9-%D9%85%D8%AA%D9%88%D8%B3%D8%B7-%D8%B9%D8%A7%D8%A6%D8%AF-%D8%A7%D9%84%D8%A7%D8%B3%D8%AA%D8%AB%D9%85%D8%A7%D8%B1-%D8%A7%D9%84%D8%B9%D9%82%D8%A7%D8%B1%D9%8A-%D9%81%D9%8A-%D8%A7%D9%84%D8%A5%D9%85%D8%A7%D8%B1%D8%A7%D8%AA-%D8%AE%D9%84%D8%A7%D9%84-2017
Dated: 25-March-2017

٥- ١٠نسبه مئويهارتفاع الصغيرة منها استمرار الطلب في دبي يعزز جاذبية الأراضي خارج مناطق التملك الحر

واصل سوق الأراضي خارج مناطق التملك الحر في دبي الحفاظ على جاذبيته الاستثمارية منذ بداية العام الجاري 2017 مدعوماً باستمرار الطلب النسبي عليها من مختلف شرائح المستثمرين والمشترين الإماراتيين والخليجيين وشركات عقارية.

شهدت أسعار الأراضي ذات المساحات الصغيرة بين 20 و60 ألف قدم ارتفاعات متباينة بين منطقة وأخرى تراوحت بين 5 و10% في ظل استقرار معدلات الطلب وتطور البنية التحتية فيها، في الوقت الذي تحافظ الأراضي ذات المساحات الكبيرة لتطوير البنايات السكنية والتجارية ومراكز التجزئة المحافظة على معدلاتها تقريباً مع اختلافات بسيطة في الأسعار.

وأوضحت مصادر أن سوق الأراضي في دبي عامة شهد تحسناً نسبياً في بعض المناطق ضمن المشاريع ذات الجهوزية العالية لتطوير مجمعات الفلل ومشروعات التجزئة مقارنة بالأراضي الخاصة لتطوير المشروعات الضخمة والسكنية في «الخليج التجاري» و«دبي لاند» و«إكسبو 2020». وتحولت بوصلة المستثمرين والمشترين بشكل عام إلى التركيز على شراء الأراضي ذات الجاذبية الاستثمارية العالية وتملكها للاستفادة من عوائدها الاستثمارية على المديين المتوسط والطويل والعودة إلى سوق التطوير والبناء مع اتساع رقعة المناطق التي دخلت السوق العقاري مؤخراً مثل «دبي الجنوب» و«خور دبي» «وقناة العرب» و«جزر ديرة» وغيرها.

وأشار عبيد السلامي، مدير عام «دبي للاستثمار العقاري»، ذراع التطوير العقاري التابعة ل«دبي للاستثمار»، إلى أن الأراضي خارج مناطق التملك الحر شهدت في الأشهر الماضية طلباً ملحوظاً وغير مسبوق لدرجة أنها وصلت إلى درجة الندرة ومن الصعب الحصول عليها بأسعارها السابقة، أما مناطق التملك الحر التي تأثرت بالدرجة الأولى بنتائج الأزمة المالية العالمية خلال السنوات بين 2008 و2012 فقد استطاعت التماسك من جديد والتحسن التدريجي لتصل إلى مستوياتها السوقية المنطقية والمعقولة مع توقعات بارتفاعات أخرى جديدة خلال الفترة المقبلة. وقال السلامي: «انخفضت أسعار العقار عموماً والأراضي بشكل خاص بمعدلات كبيرة، إلا أنها عاودت التماسك والتحسن التدريجي في ظل ثقة الكثيرين وإيمانهم بدبي وبيئتها الاستثمارية».

من جانبه، قال مهند الوادية، المدير الإداري في شركة «هاربور» العقارية، إن أسعار الأراضي وصلت إلى مستويات مغرية للشراء، إلا أن المستثمرين يركزون حالياً على الأراضي ذات المساحات الصغيرة بين 20 و60 ألف قدم لتطوير الفلل السكنية أو محال تجارية ضمن المجمعات.

وتوقع الوادية أن يكون 2017 عاماً إيجابياً لسوق العقارات في دبي على صعيد مختلف المجالات الاستثمارية ككل، بعد أن وضعت «دائرة الأراضي والأملاك» في دبي غالبية القوانين واللوائح التنظيمية التي عززت القيمة المضافة لعقارات الإمارة وارتقت بمستويات الثقة إلى أبعاد جديدة.

ويعكس كم ونوع التصرفات والإجراءات العقارية التي سجلتها «أراضي دبي» منذ بداية 2017 وحتى نهاية فبراير/ شباط انتعاشاً متصاعداً ونمواً في أداء السوق العقاري في الإمارة بدعم مباشر من الحكومة المحلية التي لا تدخر جهداً في العمل على استقرار ونمو السوق وزيادة جاذبية الاستثمار العقاري وترسيخ ثقة المستثمرين به.

وفي منطقة «جميرا»، يتراوح سعر الأرض السكنية بين 330 و390 درهماً للقدم المربعة، والتجاري بين 900 و1500 درهم، وفي «المنخول» بين 300 و360 درهم للقدم المربعة السكنية، وبين 900 و 1500 للقدم المربعة التجارية، أما «أم سقيم» فيتراوح سعر القدم المربعة السكنية بين 420 و600 درهم، والقدم المربعة التجارية بين 600 و900 درهم.

Published in: http://www.alkhaleej.ae/economics/page/36f72990-bc76-4658-b1cf-1c2af9570d83
Dated: 20/03/2017

Why buy rather than rent this year?

I am predicting that over 70% of the people who are reading this article are concerned about ensuring their financial security by building equity or “net worth”.

I am also predicting that every person reading this article understands that owning property allows will allow them to achieve their financial security goals by building an asset base that will serve them and their families’ well into the future.

For those who don’t act upon that knowledge, the opportunities that will emerge in 2017 will go begging and are bound to be viewed in retrospect with some regret by the clear majority of Real Estate investors because, put simply, only a few will open their eyes to the opportunities that 2017 will offer. History has shown us time and again, the majority will be too late to make the most of the opportunities on offer today. They will wait, pontificate and procrastinate and, later ruminate on how they missed the boat.

If you are living in Dubai now, you are uniquely placed to take advantage of a variety of positive developments.

For a start, the market is offering the best value for some time. A slew of affordable properties that have been launched over the past 2 years and there will be more launched in 2017. This structural shift in the market has been a boon for first home buyers and affordability, or a lack thereof, as a reason to continue to rent is disappearing fast. Whether it’s an affordable studio or a luxury villa, there are great value opportunities in every segment of the market supported by the most affordable payment plans seen in years.

Also, the value of your property will be increasing as the US dollar continues to strengthen in 2017. The US Federal reserve is committed to normalizing interest rates in 2017 which is good news for investors who are holding assets denominated in or pegged to the value of the US dollar.

And then there are mortgages themselves … although interest rates will be increasing going forward, they will remain at very affordable levels for quite some time. Now is the time to do some financial planning to determine how you can obtain that most desirable of assets, the family home.

And the economic environment will improve from this time forward. Put simply, Dubai needs people to support an economy that is expected to grow at an estimated annual average of 5% for the remainder of the decade and to deliver initiatives such as the 2020 World Expo. The Expo alone is expected to generate an additional 270,000 jobs and drive demand for housing and commercial facilities that, by and large, don’t currently exist. Much of the city’s planning comprehends the number of people living in the emirate to grow to 3.4 million people by 2020, a 7% annual increase from today’s population of 2.25 million.

While the price of oil is a big issue for the region’s economies, with oil representing only about 4% of Dubai’s GDP, the effect of the decline in oil prices is not as drastic as some may think. Infrastructural spending continues unabated with the total budget outlay of Dh 48.7 billion for 2017 being marginally up from Dh 48.55 billion allocated to 2016. Looking at the 5-year budget plan of Dh 248 billion, the average annual spending of Dh49.6 billion is higher by 6.5 per cent than Dh 46.6 billion spent during 2014 to 2016 inclusive. This is significant as it demonstrates an unwavering commitment to economic and societal development.

Dubai’s economy is being driven by fundamentals such as tourism and trade and a slew of new projects to grow these important revenue generating economic segments. Predicted by Mastercard’s Global Destination Cities Index to be the 4th most popular destination in the world by year end, Dubai will have welcomed almost 16 million overnight visitors in the by the close of 2016. This will represent a 12% increase over 2015 and continue a trend of approximately 10% per annum since 2010.

And those visitor number will seem paltry once the 2020 Expo kicks off. And the 277,000 extra jobs that are generated to ensure the estimated 20 million visitors to the Expo see Dubai in its most favorable light cannot be underrated in terms generating significant demand for Real Estate assets. Hosting the World Expo will provide additional impetus for the industry to enjoy continued growth and the predictable surge in demand for accommodation and commercial space of all types is sure to have a significant effect on property values.

The structural shift towards more affordable housing will not only serve to accommodate the expected rapid population growth associated with the 2020 expo, but also serve as an important factor in the development of the Dubai economy overall. Every emerging economy needs to develop a strong middle class as its expansion is critical to growing a sustainable economy and developing resilience in the face of external financial and economic shocks.

2017 will be remembered as a year of the astute investor. When opportunity knocks, be ready to welcome and embrace it.

Published: Gulf News Freehold
Dated: 19-March-2017