Ask the Agent Archives - Page 10 of 10

Mohanad Alwadiya
Managing director of harbor real estate and part-time instructor at the Dubai Real Estate Institute.

Q1. Will the prices of 2008 ever come back, and if so, when?

A1. Dubai real estate face values fell, on average, by 50% during the recent global recession. In some area, it was closer to 33%, and in others, closer to 65%, depending on the location an proerpty type.
For smiplicity’s sake, however, let’s assume that 50% is the representative value.
An investment needs to grow at approximately 7% per annum, compounded for 10 years to double in face value. Assuming your property consistently appreciates at 7% per annum, you would need to wait approximately 10 years for the face value of your real estate asset to double.
Many factors will contribute to this growth, including the pace of global economic recovery, regional economic and geopolitical factors, and of course, Dubai’s own growth strategies.
Don’t forget that one of the advantages of investing in real estate is that it can provide you a regular income and capital growth. Some properties in dubai today are returning between 7% and 9% net to the owner. This type of return is hard to match anywhere else.

Q2. I’m looking to rent a house, but I found that it has district cooling. Is this something good or bad?

A2. District cooling for the provision of chilled water has emerged globally as a way to provide cooling in a more environmentally sensitive way. Aside from the obvious benefit of having chilled water. Especially in the summertime, it helps in saving on the costs of electricity which will be reflected in lower DEWA bills for tenants.
However, the DEWA savings will be somewhat offset, as the overall utility chares of units that are equipped with chilled water district cooling will be slightly higher, since they include expenditures for fixed operating costs via the application for the appropriate consumption charges.
Most units which are serviced by chilled water district cooling are still offered at lower rental rates. If you look at newly-completed projects such as Skycourt, Rita and Moto Ciry, which provide this form of service, the affordability o units in these properties is enhanced by a number of elements, including more energy efficient cooling.

Q3. I would like to invest in a Two-bedroom apartment in Burj khalifa, but I’m not sure if that is a sound decision or not. What’s your advice?

A3. I am assuming that you are not referring to an apartment at the Armani Residence, and you are taking a long-term view of your investment.
The rate of return will depend on a number of factors, including the initial purchase price, cash inflow from the rent, cash outflow from the charges associated with maintaining the property and your projected capital growth.
Two-bedrooms (with maid’s room) in the Burj Khalifa are being advertised for around Hd3,000 per sq.ft., depending on the floor and view. Therefore, you will be looking at an outlay of approximately Dh 6 million for a reasonable-sized apartment. Service charges will be around Dh33 per sq.ft., so you will need to cash out around Dh66,000 annually.
Assuming you wish to achieve a minimum of 5% net rental return, you would need to charge around Dh366,000 per annum or Dh30,500 per month. Values in Burj Khalifa have virtually bottomed out and there have been positive signs of capital appreciation over the last 12 months. Barring a collapse in the credit markets and the recurrence of a global recession, you could reasonably expect an average capital growth of around 7% over the next 10 years.
This is particulat investment can be very lucrative. You will be investing in an architectural icon which will always give some measure of security because of its apparitional qualities, that even after taking a long-term view, the risks would appear to be of secondary importance to its value.

Ask the Agent
Mohanad Alwadiya
Managing Director of Harbor Real
Estate and part-time instructor at
The Dubai Real Estate Institute

Everybody is telling me to invest now before the prices go up again. What’s your point of view?
James H.

Well, if you are taking a long term view your investment, definitely; or if you are currently paying rent and wish to live in your own home, absolutely. If you are financially secure, have the cash available, or have access to financing, opportunities abound. In essence, over the last three years, the real estate market has moved rapidly from a seller’s to a buyer’s market.

Nowadays, buyers are getting a lot closer to true value, particularly with the willingness of sellers to negotiate as more projects are handed over. There now exists a greater range of choice and you can succeed in obtaining true value and quality in the property you purchase. It is now that the fundamentals of purchasing or leasing real estate come to the fore: location, quality construction, infrastructure, return on investments and yield.

The biggest issue is the availability of credit. There are buyers who are willing to invest in their future but the availability of funds is the major inhibitor. It is also a time where your real estate broker will really work for you. Times are tight, and every transaction is precious. You will now find many licensed brokers who will work hard as your partner in the transaction, not merely acts as a facilitator who reaps commissions for little or no effort.

Based on your experience should I list my property at a higher price and they come down with my price?
Abdul Rahman A.

Your property is only worth as much as the buyer is willing to pay. With the buyers having access to sales statistics, market reports and the Land Department’s publicity published data and price indexes; they are more knowledgeable and cautious.

Your key marketing period will be the first month your property comes on to the market. Pricing your property too high at this period would result in a lower final selling price and a longer transaction time. Based on our experience, the properties that are priced realistically from the beginning of the selling process, sell faster.

If you are dealing with a professional and experienced broker, you will be getting fact-based advice regarding what your property should be priced as to achieve the quickest and the most rewarding sale possible.

A knowledgeable professional will provide you with comparative market analysis of your property and the area or any other comparable areas. If done properly, you will be able to make your own decision on a price and stick to the correct value of your property. Furthermore, you can always get a valuation from your brokerage firm, which by law will give the current accurate value of your home.

What is the best property to invest in?
Vafa N.

Since the beginning of the infamous economic crisis, everyone has shied away from investing in real estate. Beginning 2012, slowly but surely, we have started witnessing an increased interest from long term investors who are seeking lucrative investment opportunity in real estate. Where else can you get six to seven per cent yields annually in addition to capital appreciation nowadays?

I personally believe the villa project offers an excellent investment opportunity. It’s a freehold project that boasts an excellent master plan and the villa designs are first class. The villas are available today at excellent prices, some at below DH700 per SqFt. Phase 1 of the project proved to be a big hit with the prices increasing between 15-20 per cent over the last 12 months.