Mohanad Alwadiya

MORE & MORE UAE RESIDENTS PREFER PROPERTY PURCHASE TO RENTING

The idea of achieving financial freedom and not having to blow off a good portion of your hard-earned salary on rent will always be an alluring one. Evidently, more and more people are choosing to follow this path in the UAE, as we witness a rising trend in property purchases, among residents in their 20s, 30s, and 40s, with even newly launched projects being sold out in days.

No doubt, as word-of-mouth spreads that the UAE property market is ripe for investment for the salaried class, so does the eagerness to hop on this trend and reap its benefits. However, as easy as it is to get swept up in this investment-fever, it must be noted that a good amount of research and knowledge must be put in to ensure that your investment brings you the benefits you have heard of.

Developers have noted this increased demand for supply, and, as a result, we are seeing a number of massive residential projects launching in the Dubai, Abu Dhabi, and Sharjah real estate markets. With so many options to choose from, it can be overwhelming to decide on where your investment should go. It is, therefore, important to take a step back, take a deep breath, and realize what your end goal is when investing in property, as these end goals should be one of the primary factors to take into consideration. Are you looking to immediately move into the property that you are purchasing? Are you looking to sell this property soon after its surrounding area has developed? Are you looking to become a landlord and rent out the property you have purchased? All of these questions and more need to be answered on your road to property investment.

Investing in property, whether it is in the form of one large payment, or in a series of installments that can be equal to the amount of rent you are paying right now, can become a stress-inducing process. In my book, Landlording: From Renting to Financial Freedom, I delve into the specifics of such thought processes and explain how to get from one step to the next so that the property you invest in aligns with your goals and will ultimately be a stress-free and profit-generating endeavor.

To learn more about these key points and start your very own journey into the real estate market with Landlording: From Renting to Financial Freedom, e-mail Books@mohanadalwadiya.com

How Increasing Bank Interest Rates Can Affect Real Estate Investments

Not too long ago it was announced that The Federal Reserve will increase banking interest rates by 4.75 to 5%. This decision can have significant effects on various sectors of the economy, including the real estate market. Real estate investors, in particular, should be aware of how an increase in interest rates can impact their investments.

One of the main ways in which an increase in interest rates affects real estate investment is through mortgage rates. As interest rates rise, the cost of borrowing money to finance a property purchase also increases. This can make it more expensive for investors to buy and own real estate, which can reduce demand for properties and potentially drive down prices.

Additionally, as borrowing costs increase, investors may need to put down larger down payments to secure loans. This can make it harder for some investors to finance their purchases, particularly those who are already stretched thin or have limited access to credit.

However, it’s not all bad news for real estate investors. Higher interest rates can also have a positive impact on the real estate market. As interest rates increase, it can lead to a decrease in inflation, which can help stabilize property values. Additionally, if the economy is strong, as we have seen with Dubai, an increase in interest rates can lead to higher wages and increased demand for housing, which can drive up rental rates.

Overall, an increase in interest rates can have a mixed impact on real estate investment. While it can make financing more expensive and potentially reduce demand for properties, it can also help stabilize the market and create opportunities for investors who are able to navigate the changing landscape. Real estate investors should stay informed about the Federal Reserve’s decisions on interest rates and be prepared to adjust their strategies accordingly. This is where a well-experienced, gold-ranked agency steps in to provide expert advisory services to help investors navigate the situation.

Contact Harbor Real Estate today to help you find the ideal strategy for your portfolio and future investments:

+971 4 325 1616

+971 50 916 6543

Cryptocurrency Can Buy You Real Estate


A growing number of reputable developers in Dubai have started to accept cryptocurrency as payment. Let’s explore why this is and what it means for the Dubai real estate landscape.

By now the majority of you will have heard the term ‘cryptocurrency’ and have some knowledge as to what it is. Essentially, it is a form of digital, decentralized currency that has been around since 2009. Interest in this currency has peaked and dipped in various degrees since its inception. But, lately, more and more of the general public have started to see the potentials of investing in cryptocurrency. This rising interest, along with the advances in technology that have accelerated the process of ‘mining’ crypto, have somewhat pushed the currency into the mainstream. Subsequently, the facilitation of more official, large transactions, such as purchasing property, is something that has been growing in recent years.

Recent events and market analysis show that the UAE is determined to develop the crypto industry and is heading towards becoming a crypto hub. This fact can be observed by noting that major crypto exchanges such as Crypto.com, ByBit, Binance, and Kraken have been granted licenses by the Virtual Assets Regulatory Authorities (VARA) to operate in Dubai and Abu Dhabi free zones.

With major exchanges available in the UAE, purchasing real estate with crypto has become much easier, and as a result, the real estate industry is exposed to an even greater audience, both foreign and local. This incentivizes major developers in the country to get on board with the shift, further fueling the growth of both industries. As of now, Ethereum and Bitcoin are the two cryptocurrencies accepted by UAE developers.

There are pros and cons for using each of the abovementioned cryptocurrencies, but, more than anything, most investors are greatly drawn to the idea of trading a volatile currency such as crypto that is constantly changing in value, for a much more stable investment such as real estate.

Crypto trading has been going on for a while in the US and Europe, and it can be predicted that, as a result, those around the globe with a ready crypto wallet will be drawn to invest in the UAE real estate industry. As the process is streamlined and sped up, easy, upfront purchases of properties with no mortgage can be completed within days.

It is true that there are still many who are unfamiliar with the digital currency and that, as of now, there are still limited options in terms of crypto exchanges and currencies available in the UAE, but with the growth of this industry we are sure to see a parallel growth in the UAE’s real estate industry.

2019 … A YEAR IN REVIEW.


The decade that ended at midnight on December 31, 2019 can broadly be categorized generally as consisting of 2 halves. The first half witnessed a promising recovery from the ravages of the Global Financial crisis while the second half saw many of the gains from the first half disappear as the market became imbalanced and inefficient for a variety of structural, systemic and external reasons.

From a demand point of view, the news that Dubai sales transactions in 2019 were the highest in 11 years, recording a year-on-year increase of  20 per cent is an indication that the continuing fall in prices is finally starting to challenge buyer disinterest and reluctance. A post global recession record real estate transactions completed in Dubai of 41,988 for 2019 really highlighted how the combination of falling prices and unprecedented financing offers provided by developers could not be ignored by buyers any longer.

Over 55% of the transaction made in 2019 were for off-plan properties and the success of the affordability initiatives  offered by developers along with investor inducements  such as guaranteed rental returns will ensure that developer pricing and marketing strategies aren’t likely to change anytime soon.

Looking forward, the demand for property resulting from population growth is key. The impact of the 2020 Expo on population growth will be significant as human resources are recruited into the Emirate specifically for the Expo itself and for the increased economic activity that will emanate from hosting the event.

Foreign investment will continue to be a major demand driver for the industry and with 25 million visitors who are expected to attend the 2020 Expo, the opportunity for the industry to extoll its virtues as a safe and lucrative investment alternative is unprecedented. We can expect to see increased interest from abroad, particularly as  initiatives such as long-term visas for investors and increased regulatory oversight on the industry and transparency regarding future supply pipelines represent compelling reasons to consider investing in Dubai.

Of course, the industry will continue to be buffeted by Global uncertainty. The pace of resolution of many of the geopolitical events of the past five years that have hindered global economic growth and heightened global uncertainty are still some way from complete resolution. The industry will continue to be affected by these events and issues as they affect, not only factors such as economic performance, trade policies, exchange rates and monetary / fiscal policies of virtually every country in the world, but also the confidence of investors globally.

2019 will be bettered by 2020, but it will only be a small step towards total recovery.

Investing in a Pre-World Expo Environment

Event expected to provide the impetus for continued growth in all segments. 

A lot has been said, and much has been written about Dubai’s Expo 2020 bid, and the successful aftermath of the long wait for this prestigious event that is scheduled to start Oct 2020.

Many industry insiders have been predicting how a world Expo would lead to the escalation of property rates in the emirate, and people waited, with some enthusiasm and excitement, and a tinge of fear, thinking that a sudden bubble could form and hurt the industry on the long run.

Logic dictates that hosting the 2020 World Expo will provide the impetus for continued growth in all segments of the Dubai real estate industry but, as with all extraordinary events, there are many nuances that must be considered.

The residential segment will enjoy a surge in demand for accommodation of all types, from labor camps to apartments to executive villas, for the additional 270,000 or so new jobholders that will enter the market.

However, we expect a gradual rise in rents leading up to and including the period of the event to be more likely than a sudden spike.

This expectation is based upon analyses of existing supply-demand streams, increasing industry regulation and oversight, and the fact that Dubai winning the Expo 2020 bid was already partially priced in by the market.

Values will rise, but differing asset types and locations will not move in unison. As the Expo 2020 preparations continue to move from the analytical and planning phases through to implementation and eventual launch and operational phases, real estate requirements will differ.

Initially, investor demand will drive much of the value appreciation. However, initial end-user demand is likely to increase for accommodation, both for villa and apartment units, with close proximity and easy access to the Expo 2020 site itself.

The demand for this type of property will continue to increase in the run-up to the launch and duration of the Expo, and the capital return curve will steepen as the event approaches.

Meanwhile, office and commercial space in general some located within the Jebel Ali Free Zone will also benefit from a rise in demand as operations are commenced for those companies involved in the initial construction or preparatory phases.

Developments in close proximity to the Expo site will be in focus as logistics, storage and service providers look to set up operations. Labor camps will be required from the initial stages as the race to implement the infrastructure required to cater with so many visitors begins in earnest.

Demand for residential, retail and commercial space alike will spread to the more central areas of Dubai at a later stage as retailers, hotels, service providers, and those operations supporting the tourism industry hire additional staff and set up operations to support the event, service the bevy of new business operators, or the millions of additional shoppers.

So, while the World Expo 2020 is great news for the industry, it brings with it a new set of considerations for the prudent investor. Which assets, located where, purchased in which timeframe are likely to provide the best return on the investment dollar and, perhaps, more importantly, what is the likely performance of the asset when the event is over? The 2020 World Expo will provide many opportunities for real estate investors, but maximizing returns will require some very careful planning.

AN AMUSING STORY… IF IT WASN’T SO SERIOUS!

By Mohanad Alwadiya
CEO, Harbor Real Estate
Senior Advisor & Instructor, Dubai Real Estate Institute

When it comes to amusement, I have always thought that Dubai has a definite competitive advantage in that it is uniquely placed. With its geographic location, infrastructure, stability, cultural diversity and existing reputation as a leisure destination of note, development as the destination of choice by, not only GCC families and youth, but visitors from all over the world who desire amusement, adventure and unique experiences, will play an increasingly important role in building a strong, vibrant and resilient economy and, of course, property industry.

So, it was with excitement, not amusement, which I read about the latest addition to a city already swelling with entertainment and activity alternatives – the IMG Worlds of Adventure. This amusement park took three years to build and cost more than 3.6 billion dirhams. To be labelled “the world’s largest indoor theme park” is no idle boast, with the complex covering over 1.5 million square feet or around 20 times the size of the pitch at Emirates Stadium in London.

And, wait for it… there is more to come…

The next six months should see an even bigger development which, built at a cost approaching 10 billion dirhams, will include such entertainment icons as LEGOLAND and Bollywood, and a giant water park.

The new theme parks will play a key role in ensuring the emirate’s target of 20 million visitors will be visiting the emirate annually from 2021 will be achieved. Very impressive stuff!

But the reason why I love these latest theme parks is not because I enjoy rollercoaster rides … I will leave that for the more adventurous. I am excited at the effect these fantastic initiatives will have on the economy and, more specifically, the property industry that is so close to my heart.

From an economic point of view, this is very serious business indeed!

Aside from the obvious direct benefits of tens of billions of dirhams being invested into the economy, few people realize the enormous economic contribution theme parks make to the overall economy post launch. It is a cliché, but the world is a small place and the war for providing entrepreneurial and employment opportunities is waged on a global battleground and a successful entertainment and amusement industry is just one economic weapon that Dubai can employ to great effect.

And being a global growth industry, participation cannot be ignored.  Consider the following which was sourced from the TEA/AECOM 2015 Theme Index and Museum Index:

In 2015, there were …

…420 million visits to attractions run by the top 10 global theme park groups, up by 7.2 percent.
…236 million visits to the top 25 amusement/theme parks worldwide, up by 5.4 percent.
…146 million visits to the top 20 amusement/theme parks in North America, up by 5.9 percent.
…131 million visits to the top 20 amusement/theme parks in Asia-Pacific, up by 6.9 percent.
…61 million visits to the top 20 amusement/theme parks in Europe, Middle East and Africa, up by 2.8 percent.
… 29 million visits to the top 20 water parks worldwide, up by 3.7 percent.

In a world that is struggling to generate any form of impressive economic growth, the growth within this industry is truly impressive.

Without doubt, the current world leader with regards to amusement parks is the southern US state of Florida. It’s a fact that theme parks are a major reason why people visit this American state. Here are the top theme parks in Florida and the number of annual visitors they attracted in 2014 according to the TEA/AECOM Theme and Museum Index…

… Magic Kingdom – 19.3 million
… Epcot -11.5 million
… Disney’s Animal Kingdom – 10.4 million
… Disney Hollywood Studios – 10.3 million
… Universal Studios – 8.2 million
… Islands of Adventure at Universal Studios – 8.1 million
… SeaWorld – 4.7 million
… Busch Gardens Tampa Bay – 4.1 million

Truly impressive numbers which only highlight that the economic advantages created by having such a robust entertainment industry are staggering. The state estimates tourism brings in a whopping $82 billion in visitor spending while the State Department of Economic Opportunity says that of the approximately 9.1 million workers in Florida, 1.1 million of them hold jobs directly attributed to tourism. That’s better than 1 worker in 10!

Obviously, the job creation potential of this industry, both direct and indirect is staggering… which is why amusement parks are such serious business. The true long-term value of these projects lies in the long-term economic advantages of employing people and creating commercial activities in order to develop a unique capability to entertain the families and youth of the region and beyond.

And job growth fosters population growth which is critical to any property / real estate Industry. It is the undisputed catalyst to industry growth and the population growth generated by the substantial increase in investment and employment opportunities that a successful foray into the entertainment industry would generate would be and have huge and long-lasting benefits for the property / real estate industry downstream.

Ask the Agent

By Mohanad Alwadiya
Published: Gulfnews
Dated: November, 2016

Can you please share some details on how rental increases are determined
in Dubai?

Initially, your landlord needs to give you the notice of increase at least 90 days prior to the expiration of your current contract. You should familiarise yourself with Law No. 43 which
introduced the following restrictions (summarised) with regard to legally allowable rental increases:
• There should not be any rent increase if the rent for the real estate unit is no more than 10% below the average rent that a similar property commands within a neighbourhood
• The annual rent increases can range from 5 up to 20 per cent according to how much the current rent is less than the market average
• The market average rates are to be determined by the RERA rental index

The implementation of Law No. 43 is necessary to safeguard consumer interest, the overall industry and the economy at large from rampant and unjustifiable rental increases on existing rental contracts.

Is there a state of oversupply in Dubai real estate? How does one know for sure?

It depends on an accurate estimation of construction timelines which are invariably fluid, and the demand for real estate assets due to Dubai’s growing population that is largely driven by overall economic growth going forward. In addition, it needs to comprehend a lag effect from the time that conditions conducive to development are identified by developers and when properties are finally released onto the market.

Given that the economy of the emirate of Dubai is expected to grow at an estimated 5+ per cent annually for the remainder of the decade, and initiatives such as the Expo 2020 are expected to generate an additional 270,000 jobs, the demand for housing and commercial
facilities is expected to grow significantly. Much of the city’s planning comprehends the number of people living in the emirate to grow to 3.4 million by 2020, a 7 per cent annual increase from today’s population of 2.25 million.

How is the Dubai real estate market? Is now the best time to buy, or should I wait for prices to fall further?

The real estate market is an industry full of surprises. The Dubai market has been correcting for several months and is picking up again, as the next five years
are expected to see a strong economic growth in Dubai. My recommendation is for you to start your property search immediately in the places you like as proper due diligence can take time. If you have the cash, we suggest you pay for it outright; however, don’t be afraid to take out a mortgage with varied easy payment plans that will save you considerable amounts of money.The location, surrounding infrastructure, construction quality and developer reputation as well as building amenities or properties close to an iconic development, such as Downtown Dubai or those with close access to the Dubai Metro or Tram usually provide good returns. Finally, be purposeful, persistent, patient and pragmatic, and you are well on the way to making a very sound business decision.

I have just joined the market as a property investor. Can you please help me in determining an optimal rental rate to attract my first tenant?

The simplest way to determine a good rental rate for your property is the sales comparison approach (SCA) which relies on identifying a factor that is homogenous to similar properties. For example, an apartment similar to your planned investment which attracts a monthly rental rate of Dh7 per square foot can indicate the likely cash flow you expect; however, as property managers, we do not advocate this approach.A more comprehensive method is the capital asset pricing model (CAPM) which comprehends levels of risk and opportunity cost as it applies to your investment. It identifies your potential return on investment derived from capital appreciation in addition to net rental income and compares it to other investments that you may be considering. This enables smarter investment decisions and, therefore, is the one that we use as standard procedure.

Question of the Week

I have heard some realtors use certain terms like “GFA,” “BUA” and “NFA.” As an investor, I am left in the dark. What do these terms mean?

Like any industry jargon, there are quite a few confusing acronyms used in real estate but those that you have highlighted relate to the actual dimensions of the property you are buying or leasing. For this reason alone, it is imperative that you understand them and their significance.

The gross floor area (GFA) 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 as some form of supporting service plant is excluded from the GFA.

Meanwhile, the built-up area (BUA) is the total area being developed or constructed. It is the gross floor area plus parking plus any service area associated with the subject building or project.

The net floor area (NFA), on the other hand, is the GFA minus the facade of the building (measured from the centre line of glass), plant areas, service risers, building structural core, fire stairs, lifts and lift lobbies, common corridors and common toilets. The individual measurements are used for separate reasons, ranging from purchasing a
building and calculating potential revenues to be derived from selling or leasing a building to estimating cleaning costs.

Theme Parks, Ahoy!

By Mohanad Alwadiya
CEO, Harbor Real Estate
Senior Advisor & Instructor, Dubai Real Estate Institute

Well, Dubai has done it again!!

The latest addition to a city already swelling with entertainment and activity alternatives is the IMG Worlds of Adventure. This amusement park took three years to build and cost more than 3.6 billion dirhams. To be labelled “the world’s largest indoor theme park” is no idle boast, with the complex covering over 1.5 million square feet or around 20 times the size of the pitch at Emirates Stadium in London.

And, wait for it… there is more to come…

The next six months should see an even bigger development which, built at a cost approaching 10 billion dirhams, will include such entertainment icons as LEGOLAND and Bollywood, and a giant water park.

Dubai has always considered tourism to be a key, increasingly successful and lucrative pillar to the economy, but -the latest additions to its suite of attractions are taking the emirates’ capability to satisfy the appetite of those who pursue world-class entertainment and amusement to a whole new level.

The new theme parks will play a key role in ensuring the emirates’ target of 20 million visitors will be visiting the emirate annually from 2021 will be achieved. Very impressive stuff!

But the reason why I love these latest theme parks is not because I enjoy rollercoaster rides… I will leave that to the more adventurous. I am excited at the effect these fantastic initiatives will have on the economy and, more specifically, the property industry that is so close to my heart.

From an economic point of view, this is very serious business indeed!

Aside from the obvious direct benefits of tens of billions of dirhams being invested into the economy, few people realize the enormous economic contribution theme parks make to the overall economy post launch. It is a cliché, but the world is a small place and the war for providing entrepreneurial and employment opportunities is waged on a global battleground, and a successful entertainment and amusement industry is just one economic weapon that Dubai can employ to great effect.

And being a global growth industry, participation cannot be ignored. Consider the following figures sourced from the TEA/AECOM 2015 Theme Index and Museum Index:

In 2015, there were…

… 420 million visits to attractions run by the Top 10 global theme park groups, up by 7.2 percent.
… 236 million visits to the Top 25 amusement/theme parks worldwide, up by 5.4 percent.
… 146 million visits to the Top 20 amusement/theme parks in North America, up by 5.9 percent.
… 131 million visits to the Top 20 amusement/theme parks in Asia-Pacific, up by 6.9 percent.
… 61 million visits to the Top 20 amusement/theme parks in Europe, Middle East and Africa, up by 2.8 percent.
… 29 million visits to the Top 20 water parks worldwide, up by 3.7 percent.

In a world that is struggling to generate any form of impressive economic growth, the growth within this industry is truly commendable.

Without a doubt, the current world leader with regard to amusement parks is the southern US state of Florida. It’s a fact that theme parks are a major reason why people visit this American state. Here are the top theme parks in Florida and the number of annual visitors they attracted in 2014 according to the TEA/AECOM Theme and Museum Index:

… Magic Kingdom – 19.3 million
… Epcot -11.5 million
… Disney’s Animal Kingdom – 10.4 million
… Disney Hollywood Studios – 10.3 million
… Universal Studios – 8.2 million
… Islands of Adventure at Universal Studios – 8.1 million
… SeaWorld – 4.7 million
… Busch Gardens Tampa Bay – 4.1 million

Truly impressive numbers which only highlight just how the economic advantages that are created by having such a robust entertainment industry is staggering. The state estimates tourism brings in a whopping $82 billion in visitor spending while the State Department of Economic Opportunity says that of the approximately 9.1 million workers in Florida, 1.1 million of them hold jobs directly attributed to tourism. That’s better than 1 worker in 10!

Obviously, the job creation potential of this industry, both direct and indirect, is staggering… which is why I love amusement parks.

Most commentators would relate to the increased building activity that such projects would create; however, the true long-term value of these projects lies in the long-term economic advantages of employing people and creating commercial activities in order to develop a unique capability to entertain the families and youth of the region and beyond.

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 percent of the population in 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 kilometres of territory. From an economic point of view, the provision of memorable entertainment experiences for the youth and families of the region will have a multiplier effect on the economy as a whole, including the real estate industry.

Why are Mortgages Key to Growth?

By Mohanad Alwadiya
CEO, Harbor Real Estate
Senior Advisor & Instructor, Dubai Real Estate Institute (DREI)

I read a very pleasing article over my morning coffee.

The article revealed that mortgage transactions, including refinancing, have represented approximately 50 per cent of all apartment sales September last year to date with some months achieving over 60 per cent. This is in stark contrast to what has historically been the case in Dubai, as mortgages rarely represented more than 30 per cent to 35 per cent of property sales for most of the prior decade.

This is great news for several reasons.

First, while this trend highlights the confidence of lenders in the marketplace it also highlights the increasing confidence of consumers, mostly owner occupiers, in the market to the extent that they are prepared to take on the risks associated with committing to a mortgage for the sake of purchasing some property.

This is very important to the development of long term sustainable growth for the industry as the bedrock of any property industry is its owner occupiers.  They represent the core of the industry as it is they who view property as an investment in life, not just a way to make a quick buck. And yet, historically, they have attracted focus in a market still undergoing the maturation process which is falling short and not proportionate to their importance.

Owner-occupiers see real estate in a different light. For them, it’s about creating a lifestyle. It’s about creating a home which will provide an environment that is safe and secure within which the individual, couple or family can grow and develop in all aspects whether physical, emotional, social and, of course, financial. In this respect, they have a lot more at stake than those investors with financial interests only.

Typically, they form the core of society, not overly wealthy, who are concerned with providing the family with a future. For some, the purchase of the first family home is the first step towards creating a legacy which hopefully, for the more romantically minded, will turn into a dynasty. These are the dreams which make owning their own home the most important decision they are likely to make. They are in it for the long term; there is a lot at stake, which is why availability of finance through mortgages is critical.

The second reason why this is such good news is because we are witnessing, in real time, the market adapting to legislative changes that were made in early 2014. There is no doubt that the implementation of the mortgage caps earlier in 2014 had affected the demand for many first home buyers who were relying on a mortgage to acquire their dream home.  I remember writing an article at the time of the legislative change and observing the following …

“At Harbor, we see 62% of our clients who were considering buying a property prior to the mortgage caps delay their purchase until they can accumulate the down-payment differential while 38% have settled (or compromised) for a cheaper property to get an initial foothold in the market.”

As predicted, “… the new mortgage caps have certainly produced a definite lag in demand as clients adjust to the new financial realities and many of these clients are planning to participate within the next three years.”

I am pleased to say that these observations have essentially been proven correct. The legislative change made by authorities was implemented to help cool what was then, a rampant market. The desired effect was achieved but buyers didn’t simply disappear, they modified their purchasing behavior, another sign of an increasingly resilient and maturing market.

Finally, a growing number of mortgages are being undertaken for properties that are purchased in the more affordable areas of Dubai, which further demonstrates the systemic shift to affordable housing in the Dubai property market is becoming even further entrenched as a long-term characteristic.

A natural occurrence within any economy that is growing rapidly and is formally recognized as maturing and transitioning from being a “frontier” to “emerging” market as Dubai did back in 2013, is that its middle and lower-middle income segments will expand to support the rapid rise in commercial activities and economic initiatives being instigated by entrepreneurs and corporate or government entities. This expansion is unavoidable if the economy is to grow and providing affordable housing to enable this expansion is a critical element to the future growth of Dubai and the development of the Real Estate industry into a mature model that can efficiently cater for a broad and diverse set of people with different incomes, tastes, preferences and requirements.

And demand is set to grow very rapidly. A case in point… the World Expo is predicted by independent analysts to create over 270,000 jobs. The vast majority of these jobs will not be for people occupying senior executive positions. They will be for people in middle management or lower positions, many with families, who will be seeking affordable accommodation.

The importance of maintaining affordability for the average buyer is critical and the availability of affordable finance in the form of mortgages is vital to enable many to gain access to this lucrative market going forward.

Aspire to be a Property Owner

By Mohanad Alwadiya
CEO, Harbor Real Estate
Senior Advisor & Instructor, Dubai Real Estate

Among the most fundamental (and practical) dreams people share in common is the dream of owning a home. But why is it that not everyone succeeds in this endeavor? Economics, of course, plays a significant role in the overall scheme of things. So, given the opportunity to purchase a property, or your home, no less, would you not hold on tightly and make sure you own (pun intended) it?

In Dubai, while there has been a correction in rental values, it has essentially lagged behind the correction in property values, and I do not believe that the general rent decline will exceed 10% in most areas. Rents will eventually start to rise from 2017 as preparations for the 2020 Expo start gathering pace.

I have always held a view that owning a property is essential to underpinning the accumulation of wealth and building net worth. Obviously, the accumulation of the property asset itself must be done judiciously and with a high level of diligence and care but, in my experience, the vast majority of people who have taken the step towards property ownership have benefitted significantly.

The essential question to ask is “How do I use my money to increase my wealth instead of the wealth of my landlord?”

Buying your home is a positive step towards establishing your financial security by building your equity or “net worth”. Owning property allows you to change the application of your hard-earned dirhams from covering an expense which offers you no financial return to investing in an asset which does. In a way, it’s a forced form of saving which will reap benefits for you in the future.

Conversely, paying rent actually detracts from your ability to build net worth because, not only are you paying out money for no financial gain, but you are at the mercy of rental inflation as well. This is a problem because you are consistently being asked to pay more while your salary increases are lagging behind, effectively eroding your ability to build wealth. By owning your home, inflation is working in your favor because, in all likelihood, your property is increasing in value and, if kept for a number of years, will enjoy an inflation-driven compounding effect on its value. This allows you to build your individual net worth through the capital appreciation of your property – something which is very important for your financial future.

The fundamentals of buying real estate in Dubai are no different from those elsewhere in the world. As an expat in a new country, you may be even more anxious regarding the decision to buy which is all the more reason to stick to some tried and true principles.

First of all, you need to be very clear as to why you are investing in real estate. Whether it’s to provide the family with a home, generate a steady stream of income or build equity for the future, make sure you are very clear about what your expectations are and quantify them wherever possible. Plan for the long term as the industry is cyclical yet very rewarding if you ride out one or two cycles.

You also need to ensure that you know what you can afford. If you have the cash to pay for the property that you really want, I suggest you pay for it outright; however, don’t be afraid to take out a mortgage and make the purchase as at least your repayments are building equity, not being lost forever on rent.

Then it’s a case of finding the right property. I suggest you contact a reputable real estate brokerage to assist you in doing this, but make sure that you conduct your own research as well. It’s a big decision you are making, and you need to make sure you take the responsibility and are fully aware of what you are doing.

As always, stick to the basics. Think carefully about location, building quality, developer reputation, completion status and quality of infrastructure and building amenities. Properties which are close to the beach (especially with a sea view), a golf course view or part of an iconic development such as Downtown Dubai is a good place to start. If you can have close access to the Dubai Metro, even better. These locations are more likely to provide superior appreciation in capital value as well as be able to ride out cyclical volatility with less distress.

You also need to consider the effectiveness of the owners association, service charges and the quality of maintenance services.  Facility management is becoming increasingly more important to determining the value of buildings, and it will have an effect on the long-term value of your investment.

Finally, think clearly and rationally. If you cannot find a property immediately that will satisfy your requirements and objectives, do not settle for less, regardless of what’s happening in the market.