Gulf News

ASK THE AGENT

I have an apartment due for handover in Dubailand. Will apartments in this development show the same capital growth as what has been experienced in areas like Dubai Marina and Downtown?

As the industry continues to recover. We expect secondary segments of the market to follow the trend set by the leading segments. A prime example is the Skycourts project. Located along the Dubai Al Ain Road. This project has seen excellent capital growth with some apartments growing by 15% over the past year, and rental premiums of at least 7% are not uncommon.

Looking forward, there will be many influencing factors affecting capital growth in these areas such, as individual segment inventory levels. Project quality and developer reputation in addition to economic growth and population growth.

Much of Dubai’s 2013 new apartment inventory will be located in Dubailand which will stifle capital growth somewhat. However, we see growth accelerating in these areas from mid 2014 onwards, with demand being driven mainly by economically induced population growth – especially in the years leading to Expo 2020, and growing confidence in the industry.

A few of my friends have bought their first apartments recently and I am still undecided as to whether I should continue to rent or buy. Can you provide any insights?

Buying your first property can be a daunting prospect. However, after having done so, the vast majority of people say that, in retrospect, they should have done so a lot earlier. It’s important to start building your equity or “net worth” as an initial step towards financial security.

Paying rent actually detracts from your ability to build net worth. For example, as somebody who pays rent, Inflation is a problem because you are consistently being asked to pay more. Conversely, as a property owner, inflation is working in your favor, because, in all likelihood, your property is increasing in value and, if kept for multiple years, you will enjoy an inflationary compounding effect on your property’s value.

Owning property allows you to change the application of your hard earned dirhams from covering an expense which offers you no financial return to an investment which does, in a way, it’s a forced form of saving which will reap benefits for you in the future.

How has the Dubai real estate Industry improved from a regulatory point of view?

Lawmakers in Dubai have been working very hard to introduce laws that better protect the rights of industry participants. This includes measures to standardize and clarify the relationship between parties to a real estate contract or agreement, and provide recourse where a party has been somehow disadvantaged because of unethical practices.

There has been a lot of progress made in other areas as well, such as the management of investor finances with the introduction of escrow accounts; owner empowerment with the introduction of the
Strata Law, and the introduction/registration of owners associations; investor recourse – where disadvantages caused by delays in the handing over of projects or changes specifications of properties are addressed; or tenant protection with the introduction of regulatory mechanisms to restrict the imposition of ridiculous rent hikes.

In addition, the Dubai Land Department, RERA and the Dubai Real Estate institute are committed to raising the level of professionalism of real estate practitioners by including mandatory training in the required ethical practices, implementation of systems such as Oqood and Ejari, and focusing on the elimination of misleading advertising and people misrepresenting themselves as registered real estate agents.

 

Expert Eye: Office space – the next opportunity?

With Cityscape now a distant memory and all the headlines and hype regarding Dubai’s resurgent real estate scene starting to sound a little repetitive, it’s time to sit back and contemplate where, as a real estate investor, the next untapped opportunity may be.

There is no doubt that most of the focus has been on the residential market, however, despite Dubai’s strengthening economy, investors have been slow to consider office space despite values having bottomed out early in the second quarter of this year. A few points to consider …

• The Dubai economy is doing very well. Economic growth is strong at around 4.5 and is being driven by fundamentals such as tourism and trade, and new projects to expand these important revenue -generating economic sectors are a feature of Dubai’s growth outlook

• Confidence in the emirate is growing rapidly, not only because 6f its regional ‘safe haven’ status, but also because of the regulatory measures and economic framework initiatives that are being implemented

• The amount of infrastructural, development and economic initiatives, culminating in the possible hosting of the World Expo in 2020 are indicative of the government’s determination to compete on the global stage

• Population growth is forecasted to be at least 5 going forward and, by some estimates, is considered to be conservative and the human capital requirements going forward will be enormous

• Business establishment costs, including the cost of capital, have been at their lowest for years, and opportunities exist for real estate investors to benefit accordingly

While office rental returns are in the very early stages of recovery, Dubai office space is still cheap, and with a high, albeit shrinking, vacancy rate of 45 , there are definitely opportunities for value purchases providing strong cash flows increasing with Dubai’s economic momentum over the longer term.

Already, 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 represents strong investment potential.

ASK THE AGENT

 

News regarding the return of long queues at project launches’, flipping of properties and double digit growth is starting to sound like a bubble might be developing. Is the recent growth sustainable?

Dubai’s real estate recovery following the global financial crisis has consolidated from a “surge” in 2011 that included the Arab Spring and other extraneous events as catalysts, into a “trend” as evidenced with a strong 2012 performance with momentum continuing well into 2013. The sustain ability of the recovery is being underpinned by an economy which is steadily strengthening, showing strong GDP growth of anywhere between 4.0 and 4.5 which is mainly driven by the strong performance of the tourism and retail sectors, with trade and logistics also growing significantly. Local real estate recovery is being fuelled by growth in these core areas of the economy, aided of course, by the economic or geo-political problems being experienced elsewhere in the world.

In addition, there is no doubt that investors have returned to Dubai which is being seen as more favorable compared to a weak Eurozone, a slowly recovering US and uncertainty regarding the true state of the Chinese economy.

I bought my apartment about a year ago. A family recently moved into the unit next door, and the children are quite unruly and play noisily in the corridor. I have spoken nicely to the parents about the noise but nothing seems to stop them. What can I do?

You will need to maintain a good relationship with your neighbors and not get into any heated arguments over this matter. I suggest that you get to know your owners association and ask that an amendment be made to community rules regarding the use of corridors as playgrounds by children. Remember, the purpose of the association is to manage, operate and maintain the common areas such as hallways, lifts, stairwells, recreational areas, building systems – virtually all of the “owner shared” elements of the building in question, including rules with regard to how these areas are to be utilized by the residents. I suggest you take your issue to the next meeting and raise it with the association as it would seem to be a clear breach of community rules.

I have been thinking about investing in Dubai Marina but have been a little put off by the sharp increase in prices over the last year. Would you suggest any alternatives? 

You need to consider Jumeirah Lakes Towers. While Dubai Marina is a location of note, entrenched as a respected and recognized area of Dubai, prices have been rising so sharply that some buyers must consider other areas. JLT enjoys a very strategic location. While there may not be a sea view, the proximity to Dubai Marina (including JBR) and all that the place has
to offer is certainly tempting, and it will cost you anywhere up to 25 less depending on the type of property you are looking at.
For a long-term investment purchased today, I would slightly favor Jumeirah Lakes Towers as I anticipate that the better quality buildings in JLT will enjoy more impressive capital growth over the long term given the project commenced its recovery after Dubai Marina, and the likelihood that it will benefit from buyers and tenants such as yourself who consider the more iconic locations a little out of the acceptable price range.

Property measurement standardization.

The news in September stating that Dubai has announced its support for the implementation of an International Property Measurement Standard (IPMS) is yet another sign of the local industry maturing even further.

The IPMS is being jointly developed by over 20 notable organizations including the IMF, Royal Institution of Chartered Surveyors (RICS) and Building Owners and Managers Association (BOMA International), and will address global inconsistencies in the way property is measured.

One of the areas of confusion for many property investors in Dubai has been the variety of acronyms and terminologies used to describe the actual area that the investor is considering purchasing. Recently, I decided to quiz several of my investor clients as to what constitutes “BUA,” “GFA’ and “NF A” . I was little surprised that only a quarter of them could accurately answer the question.

Of course, we all know that BUA stands for “built- up area” and is the total area being developed or constructed on. Another way of looking at it is that it is the GFA plus parking space plus any service area associated with the subject building or project. So, what then is the GFA?

Well, the GFA is the gross floor area which is the total floor area of a building including any underground saleable or leasable area (such as basement shops) but excluding parking and underground technical areas. Any building used for the purpose of supporting/ housing any type of service plant should be excluded from the GFA

But wait a minute, there is another unit of measurement which is used – the NFA which is the net floor area and is the GFA as described above, minus the facade of the building (measured from the center line of glass), plant areas, service risers, building structural core, fire stairs, lifts and lift lobbies, common corridors and common toilets.

Confused? am not surprised if you are; however, the individual, measurements all play important yet
differing roles and are used for separate reasons ranging from purchasing a building, calculating potential revenues to be derived from selling or leasing a building, to estimating cleaning costs. 

Hiring frenzy reaches new high in Dubai realty

PACKAGES ARE GETTING SWEETER AS COMPANIES RACE TO SNAP UP BEST TALENT AVAILABLE

The festive season has started early for real estate professionals in the UAE. If the current momentum is sustained in the marketplace, they have every reason to party hard right through to the New Year as well.
Hiring has picked up across the board and for existing personnel there have been sweeteners in the form of pay rises of 3 to 5 percent compared with the same time last year, according to a senior official at Macdonald & Co, the specialist consultancy.
“Large developers are hiring new sales and marketing staff as they look to re-brand and re-launch their products and sell off-plan again,” said Ben Waddilove, director. “We have completed 22 percent more placements between April and September compared to the same period last year.”
The salary hikes and better packages are in evidence in specific areas such as development and project management, with developers placing premium on candidates having regional experience. “It is harder to recruit into locations such as Saudi Arabia and Qatar as there is so much going on in Dubai and Abu Dhabi,” said Waddilove. “The rapid increase in rents is also creating upward pressure on salaries as the cost of living increases.
“The positive market sentiment is feeding through to the consultancies that service large developers and we are noticing that some of the smaller players are now looking to hire and expand their teams.”
Despite all signs pointing to the property market remaining tuned to an upbeat mode, real estate firms are still showing a certain reserve on hiring practices. “We do not see a return to the situation in 2005-08 where developers hired very large teams very quickly . . . employers are much more selective.”

Dynamic situation
While developers work with the staffing numbers best suited to their immediate priorities, the situation at estate agencies is much more dynamic. “We have been receiving an increasing number of calls from former agents who, after leaving the industry as a result of the recession, now wish to re-enter the fray,” said Mohanad Al Wadiya, managing director at Harbor Real Estate. “We are also receiving calls from agents in the UK, South Africa and Australia.
“All of them have read about Dubai’s resurgence and are interested in opportunities in the locals market. In addition, the tax-free environment and eventual strengthening of the dirham are major draws.”

Competitive scene
With an eye on ensuring optimum retention, Harbor, currently in the midst of another recruiting drive, has instituted a compensation and benefits package that includes the possibility of agents getting up to 90 percent commission on property sales and leasing.
“The package was developed with the assistance of professionals from several industries including automotive, media and finance; high performers have the opportunity to achieve monthly recognition rewards and annual performance bonuses. In addition, a health insurance and savings scheme has been developed with Dubai’s National Bonds Corporation.”
But with more agents fighting to land deals, it is getting a bit crowded in Dubai realty. “After a point the sweet spot is gone as more players share the spoils,” said Chandrakant Whabi of Acrohouse Properties. “Dubai’s real estate industry is now at that point.”
“With more than 400 registered real estate companies already operating and more in the pipeline, it is going to be lot more competitive.”

Realty: Tempo should ensure fee hike is taken in stride

But buyers of Dubai property might soon have to factor in a possible tightening of mortgage lines

Dubai: Give property buyers some space and they will start to take the hiked registration charges in Dubai — from 2 per cent to 4 per cent which came into effect from October 6 — in their stride. At least, that is the sum and substance of what market observers are forecasting.

“There haven’t been any transactional activity drop as such after the announcement [late last month],” Yash Shah, sales and leasing manager at SPF Realty, said. “The market will soon absorb the new regulations and move forward. It just needs some time to sync in the market.”

But that, to put it bluntly, is the crux of the issue. Will the hike go far enough to slow down the pace of increase in activity in key freehold locations of Dubai?

There was some talk about the momentum tapering off slightly once the wave of buying spurred by the Arab Spring subsided. That never happened, as the last two quarters saw a surge in transactions, as recorded by the Dubai Land Department (DLD). Property value gains are still sticking to the double-digit percentage growth during the same period.

According to top DLD officials, the hike will go far enough to cool down “excessive” speculative buying and selling in the chase for a quick profit taking. At the same time, they also make a point of emphasising that local registration charges are still much lower than in most mature real estate investment destinations.

More measures likely

“Of course, the idea is not to restrict the market altogether but allow a slower rate of increase,” Robin Teh, country manager at Chesterton International, said. “There might be more measures being introduced as the months progress.”

While cash buyers can take increased transaction costs in their stride, it may be less so for mortgage-backed buyers. There are still concerns over the loan-to-value (LTV) upper limits that the UAE Central Bank might impose shortly, forcing buyers to put up more equity as down payment.

That plus the doubling of the registration charges now will mean a sizeable funding commitment upfront.

But Shah reckons that the market and its buyers just need some extra time to adjust. He says the registration charges will be shared by the buyer and seller, which is the norm now (even though the regulations place the onus on the buyers alone.)

“The raised fees will be equally shared by buyers and sellers, so I don’t see a need for investors to talk of the sudden hike in fees,” Shah said.

“Once the market syncs with the new changes, there won’t be any correlation between the higher transaction charges and a slower growth in property value gains.”

Source: http://gulfnews.com/business/property/uae/realty-tempo-should-ensure-fee-hike-is-taken-in-stride-1.1240110

Recent property buyers in Dubai caught between rock and hard place

Sellers insist that these buyers should stick to the market norm of paying the registration charges in full

Dubai: With property registration charges doubled to four per cent from October 6, buyers involved in recent transactions are suddenly dealing with a funding crunch they never anticipated.

Sellers insist that these buyers should stick to the market norm of paying the registration charges in full, even though the Dubai Land Department regulations clearly state that these should be borne equally by buyer and seller.

“An unseemly tug-of-war has broken out in those transactions where the buyer does not have immediate access to the additional funds and the time limit on their mortgage applications is ticking away,” said a property agent. “It leaves affected buyers between a rock and a hard place while sellers hold all the aces.

“The only solution would have been for the authorities to extend the period before which the hike came into effect.

Source:  gulfnews

 

Dubai housing headed for correction

House prices in the emirate have climbed more than 22% over the past year

Dubai: Residential house prices in Dubai are increasing at an unsustainable rate and may see correction over the next 12 months, a report by property consultancy Jones Lang LaSalle (JLL) said on Thursday.

House prices in the emirate have climbed more than 22 per cent over the past year – higher than any major global market – as billions of dollars of government real estate projects triggered a buying binge and stock market bull run that has caused concern at the International Monetary Fund.

“The rate of increases seen over the past year is indeed unsustainable…while residential prices and rents will continue to increase over the next 12 months, the rate of increase will decline somewhat,” the JLL report said.

The surge has largely been driven by speculative buying, JLL said, noting: “Such rates of increase cannot be supported by the fundamentals alone.” Data from the Dubai Land Department shows 80 per cent of real estate sales in the first half of 2013 were cash transactions, suggesting the speculative buying that the emirate witnessed in the previous boom period is regaining traction.

Dubai’s property market prices collapsed by over 50 per cent in 2009 after the global economic crisis. The IMF warned in July that overspending could leave Dubai vulnerable to another debt crisis if global market conditions deteriorated.

JLL’s report suggested the current overheating would be tempered by new regulation, significant house supply and developers being less dependent on pre-sales.

Dubai said last week that it would raise the registration fee charged for real estate transactions to four per cent from two per cent to prevent excessive speculation in the property market.

The government is also working on introducing mortgage limits for expatriate and local investors.

About 45,000 new housing units are expected to be delivered in Dubai before the end of 2015, representing an annual increase of around 16,000.

Source: gulfnews

Upscale District One to test market sentiments

Formal sales to happen before year end with villas at between Dh1,800-Dh2,000

Dubai: Dubai’s next big thing by way of a super-premium residential location, the District One in Mohammad Bin Rashid (MBR) City, will have the first formal sales launch of its villas before the year end, according to the developer.

Indicative launch prices could be in the Dh1,800-Dh2,000 range, which in itself would set a new pricing benchmark for upscale locations other than on the Palm and signature developments as the Burj Khalifa.

The developer, Meydan Shoba (an equal joint venture between Meydan Group and Shoba Developers), confirmed that pre-launch bookings are already on for District One, which will be an all-villa project totalling 1,500 residences set over a sprawling 700 acres. There will be multiple sales phases. The entire project, located along Al Khail Road and to cost Dh21 billion, would take between five to eight years to develop and also include a central park, water bodies, hospitality and promenade-fronting retail elements.

“It will be a low-density residential location and as a developer we can confirm that it will remain so,” said Ajay Rajendran, vice-chairman of Shoba Group. “The premium nature will come through not just from the quality of what will be offered but the fact that it will be the only new exclusively villa project being built close to the centre of the city.”

The developer is offering quite a few options on the villa designs, with unit sizes varying from 5,550 to 27,000 square feet. “Between 90-95 per cent of what a buyer would want in terms of design and scale is available through the options we have created internally,” said Rajendran. “On the pricing, we have not included the garage space, decking or open balconies into the offer.”

Cost of development will be met through internal reserves, debt and property sales. Initial construction works have started on site and the first of the major contracts are due to be awarded before the year is out.

On whether there wouldn’t be disruption to future residents in the initial phases from the continuing construction activity at others, the official said: “The development borders three existing and busy arteries and this would reduce any such concern.”

Existing villa values in Dubai have been on an upward trek ever since the market turned itself around and cash buyers began snapping up anything that was instantly available. Value gains of 20 per cent plus from the lows of 2010 are the norm for villas.

Rajendran sees a connect between the ongoing rental gains and demand for property. “As long as rentals are gaining, investors have less reason to worry about asset prices as the momentum is centred around strong fundamentals,” he said. “This is so even if the pace of rental growth slows down.”

Source: gulfnews

 

A progressive step in rental dispute resolution

New dispute centre has work cut out though some provisions need more clarity

His Highness Sheikh Mohammad bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, issued Decree No. 26/2013 establishing the Rental Disputes Resolution Centre. The Centre aims to provide a specialised judicial framework to deal with rental disputes and to improve the resolution thereof through a simple and expeditious mechanism.

Finding an efficient mechanism to resolve rental disputes in Dubai goes back to the ‘70s when a committee was formed in Dubai Municipality. The logic behind a quasi-judicial committee outside of the Court’s framework was that the market for rentals was governed by norms that required special knowledge that the regular courts may not necessarily possess. In addition, it was thought that delays associated with the court system would damage the real estate market, which could not afford having properties vacant or not generate income pending a court ruling.

The initial jurisdiction of the Rent Committee was confined to evacuation orders, which required swift decisions and actions. The decisions of the Rent Committee enjoyed judicial force and were as such enforced by the courts. There was no recourse to appeal or any sort of opposition as promptness was the main drive for the Committee.

However, its role expanded with time to cover any claim relating to rents and not merely evacuation cases. This meant it had to deal with legal issues that in some cases were complex and beyond the layman expertise of its members.

An added element was that the Committee worked in a vacuum of proper written proceedings and rules, which was a source of confusion for the parties dealing with it. With the real estate boom of the past decade, the number of cases the Committee had to deal with exploded and despite the increase in members and extended working hours, it was simply unable to cope with the volume of cases before it. In addition, the rise in the level of legal complexity led the Committee, composed fully of laymen, to struggle in dealing with these cases in spite of the sincere efforts and good intentions of its members.

So what is new in Decree No 26? The starting point is the jurisdiction is wide enough to capture all disputes relating to rents. However, it excludes rental disputes arising in free zones that have courts or special committees to deal with them (in a reference to the DIFC), those arising out of financial leasing and long leases, which are governed by Law No. 7 of 2006 in respect of Real Estate Registration.

The major development in the Decree is that the Centre is presided by a judge and all committees has a judge as a member in addition to two laymen members. Thus, the formation of the committees preserves the expertise that rent disputes require while adding a legal element that the previous ones lacked. The Centre has four divisions: for Conciliation and Settlement, First Instance, Appeal and Execution.

The other interesting development is that the decisions of the committees are subject to appeal, a process that the previous ones did not have and which attracted a lot of criticism. The appeal committees is an indication that appeals have more legal elements that require consideration. In an attempt to strike a balance between the requirements of justice and the seriousness of appeals, the Decree requires for the admittance of an appeal, the judgment debtor must deposit 50 per cent of the decreed amount with the Centre.

The Decree provides that claims where the value thereof is less than Dh100,000 are final and not subject to appeal except in cases of evacuation, lack of jurisdiction, where the parties were not properly summoned or where forged documents were presented. It is most likely that parties to disputes will lodge appeals based on the many exceptions that the Decree allows which will render in effect the threshold impractical.

The Decree requires that committees render decisions within 30 days of the file being referred to them. However, this period can be extended indefinitely, which is most likely to happen in the majority of cases.

There is no doubt that it is a major development in resolving rental disputes in Dubai. The ultimate extent of success of this mechanism will depend on how efficiently it will be implemented.

— The writer is the chairman of Baker & McKenzie Habib Al Mulla.

Source: gulfnews