Gulf News

GCC Governments lead the way in construction

Government-led social infrastructure projects will drive growth in the construction sector over the next decade

Government-led initiatives will drive growth in the GCC construction sector over the next decade as regional governments continue to focus on social infrastructure projects, experts say.

There will be an estimated Dh3.3 trillion of construction developments underway across the GCC between now and 2020 according to a statement by UAE-based building material company Danube released this week.

The statement cites a report by Kuwait Financial Centre (Markaz).

Real estate projects account for an estimated Dh1.89 trillion of the current developments across the GCC, Danube stated.

Andrew Jeffrey, Director, Infrastructure & Capital Investments at Deloitte Middle East, said demand for housing, road, and rail projects would drive the construction sector.

“There are significant projects like the nuclear programme in Abu Dhabi and the RTA in Dubai is expanding, which is helping provide access to some developments in residential areas,” Jeffrey said.

Jeffrey said that Dubai would follow through with fundamental initiatives as the emirate positioned itself as the premier employ and financial hub in the Middle East.

Jeffrey said public sectors in Abu Dhabi and Dubai would invest in health and education as the two emirates cement themselves as major players.

 

Financial crisis

Dubai-based Craig Plumb, Head of Research MENA, at Jones Lang Lasalle said the construction industry had been picking up since several pre-financial crisis projects had restarted.

Plumb said a lot of activity shifted to Saudi Arabia and Qatar following the financial crisis but had returned to the UAE. Plumb added that the UAE had become cautious of oversupply in the market and said that projects would be phased out over longer periods.

Mohammad Bin Rashid City, Bluewater Island by Merass holding, major retail extensions at Ibn Battuta and Dragon Mart, the Louvre, and Yas Mall in Abu Dhabi, were listed by Plumb as signs of sustainable for the construction sector.

Jeffrey said developments by the Abu Dhabi and Dubai government were only beginning and would be fuelled by a more sustainable approach when compared to pre-financial crisis outlook.

The UAE has benefited from the Arab Spring, Jeffrey added, which has highlighted the UAE as a good place for investment.

Jeffrey said social infrastructure initiatives in Qatar led by Qatari Public Works Authority ‘Ashgal’ would add to industry growth.

Ashgal, who are responsible for the construction and management of major projects in Qatar, have projects in the pipeline valued in excess of 100 billion Qatari according to their website.

Jeffrey added the construction sector in Saudi Arabia would maintain growth due to demand for housing, education and healthcare in the kingdom.

Asked whether significant growth was dependent on headlining grabbing events Dubai Expo 2020 and Doha World Cup 2022, both Jeffrey and Plumb said they would not be a catalyst.

“It’s the legacy of the event that’s important,” Plumb said, add that these events were bringing forward developments such as Dubai World Central Airport and the Metro expansion.

On the notion of foreign intervention in Syria, Jeffrey and Plumb agreed there would be no impact.

The UAE would still build a nuclear programme and capital project infrastructure would not be impacted but the perception of independent investors could be hampered by conflict in the Gulf, Jeffrey said.

Coline Schep, Associate Analyst at Control Risks in Dubai, an independent specialist risk consultancy, said there was no indication so far that projects would be stalled if there was intervention in Syria.

Schep said at present speculation of intervention was the biggest risk as it impacted investor confidence.

“If conflict was to break out involving the US then certain companies would become more cautious,” she said.

 

Source: http://gulfnews.com/business/construction/gcc-governments-lead-the-way-in-construction-1.1227044

UAE built asset wealth $1 trillion

The UAE’s built asset wealth is expected to increase by 7 per cent to $1.69 trillion over the next 10 days

Dubai:The UAE’s $1 trillion of built asset wealth is expected to increase by as much as 7 per cent to $1.69 trillion over the next decade, according to property and infrastructure consultants EC Harris.

The Global Built Asset Wealth Index, released on Monday by EC Harris, said UAE citizen enjoy some of the highest levels of built asset wealth. The alternative economic indicator valued private and public property. including infrastructure of 30 different countries against each other. The UAE ranked 25th overall and is expected to jump two positions by 2022 as its built wealth asset increases to $1.69 trillion. The UAE will be joined by Singapore and Brazil as the expected highest climbers over the next 10 years.

Source: http://gulfnews.com/business/economy/uae-built-asset-wealth-1-trillion-1.1226628

Tired of managing your properties?

There are many happy real estate investors around at the moment. The past 24 months have rewarded many brave, fortunate, astute or lucky investors for making the decision to place their hard- earned money into Dubai property and we congratulate them, for they are integral to the engine of our industry.

Now, it is most important that these investors do not lose focus on managing their assets as some will no doubt be lulled into complacency on the back of stellar returns. Investing in property is never a “set and forget” proposition, and realizing the true earning potential of your property assets requires careful management.

Investing in property has a very simple purpose -to create wealth. However, your property investment portfolio needs to be nurtured, maintained and managed to ensure its wealth-creating potential and capabilities are achieved. This, of course, is no different to managing a share portfolio, business venture or any other type of investment. Complacency will lead to underperformance and maybe even losses.

Not everybody has the time or is comfortable with managing property. However, there is expertise available to help you, and you should consider engaging a good property manager who will ensure that you maximize returns from your property portfolio and enable your long- term portfolio strategy to be realized.

Formulating a good property investment portfolio strategy requires years of experience and expertise, and will consider history, current market factors, forecasts, opportunities, trends, risk factors, and the likelihood of relevant future events, whether they be economic, political, regulatory or financial in nature.

Delivering the strategy (and your eagerly awaited returns) will require an activity plan addressing pricing and marketing, resourcing, customer relationship management, tenant management and policy, cost management, maintenance supervision, communications and review schedules, status reporting and financial statements. This should be the minimum that you expect.

Think of your investment as your business. Proper management is essential and you need to ensure it’s in good hands providing you with the returns you expect with as little hassle as possible.

ASK THE AGENT.

Q 1: Given the recent rise in demand, are there any advantages now by buying “off plan”?
Michael P. – Dubai

A 1: Off plan opportunities should not be dismissed and an increasing number of astute buyers are buying properties which are nearing completion, usually within the ensuing six months.

These buyers are very discerning. They are usually looking for certain property types which they believe will be keenly sought in the future, and villas are now heavily in vogue for the “off plan” opportunists.

Relative to other property types, demand for villas has been grown rapidly in the last 18 months and, given the current short supply and limited number in the pipeline, that trend is expected to continue going forward.

By buying “off plan”, the buyer hopes to reap the benefits of price rises once the villa is completed and making an immediate return on investment of anywhere up to 20% just 6 months after purchase. The key is to picking the right asset type, in the right development at the right price.

Q 2. which would be the better investment, purchasing a 2 bedroom apartment in the Dubai Marina or something similar in JLT?
Marcus Z.

A 2. Apartments in Dubai Marina have witnessed strong capital appreciation of around 15% since the start of 2012. This growth is a continuation of a trend which began early in 2011 and we expect it to continue as demand for properties in prime locations continues to strengthen so, if purchased wisely, you are likely to enjoy healthy capital growth going forward.

You can purchase a good quality apartment in a well managed building for around AED1000 to AED 1,300 per sq. ft. Once owned, you can expect to pay around AED15 per sq. ft in service charges and can expect to generate anywhere between a net return of 5.5% and 7.0%.

Apartments in JLT have not fared as well as their Marina counterparts. While cheaper at anywhere between AED750 and AED950 per sq. ft., the rate of capital growth in JLT has been nowhere near that of the Dubai Marina. Service charges will be lower at around AED11 per sq. ft. and net rental returns of 5% to 7% can be achieved particularly if you purchase in one of the better quality buildings.

On balance, I believe Dubai Marina, particularly those buildings located within easy walking distance to the JBR walk, to be the better alternative.

Q 3. The Rental Scam in Dubai has been all over the news recently. What precautions should I take to ensure I don’t get scammed?
Mike H, Dubai

A 3.
1. If renting directly from the owner, verify the owners identity

2. Make sure the person claiming to be the owner actually does own the property

3. Utilize a standard form of contract. See www.ejari.ae/PublicPages/DownloadPdfTemplates.aspx

4. Ask to see the agent’s Dubai Real Estate Institute registration credentials or go to www.dubailand.gov.ae/English/Real_Estate_Licenses/EngLessons.aspx which displays a complete list of registered Real Estate Agents

5. If the broker is a signatory to the rental contract, make sure that you see a notarized Power of Attorney from the owner

6. Check out the Real Estate Company credentials by accessing www.dubailand.gov.ae/English/Real_Estate_Licenses/EngLessons.aspx

7. Ensure the name of the owner on the contract is the same as the owner on the title deed

8. Ask to see proof that Service Charges have been paid and are up to date

9. Make sure you register new rental contracts with the Land Department on www.ejari.ae/TenantCertificate/Tc_certificate_registration.aspx

10. Read the contract terms and conditions carefully and understand your rights and liabilities as a tenant. These can come directly from the landlord or imposed by the OA of the community you rented within.

visit : http://www.harbordubai.com/presspage.php?pg=press&cat=A&nid=223

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

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

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.