Blog

10 عوامل مؤثرة في المشهد العقاري خلال 2017

قال مهند الوادية المحاضر في معهد دبي العقاري التابع لدائرة الأراضي والأملاك بدبي ومقدم برنامج معمار بنسختيه التلفزيونية والإذاعية، ان قطاع العقارات في دبي اثبت جدارته وسط ارتفاع حدة المنافسة العالمية على استقطاب رؤوس الأموال. إذ لا يزال السوق يتصدر قائمة اهم الوجهات الاستثمارية العالمية. وأوضح الوادية أن هناك 10 عوامل من وجهة نظره ستؤثر على أداء قطاعات العقارات المحلية والعالمية وقدرتها على جذب المشترين من فئة المشتريين النهائيين أو المستثمرين وهي :

1 أسعار النفط

إن سعر النفط لا يزال يؤثر على مستويات السيولة، وعلى القوة الشرائية وأداء اقتصادات الدول التي يعتمد اقتصادها على عوائد النفط وأيضا على ثقة المستثمرين بشكل عام. ولذلك ليس هناك شك في أن الحفاظ على أسعار النفط عند أو فوق 50 $ /‏ برميل خلال عام 2017 سيساعد ايجابيا على أداء قطاع العقارات لاسيما وأن اقتصاد دبي غادر منذ زمن الاعتماد الكامل على النفط في نموه متوجها إلى التنويع.

2 أسعار العملات

تبلغ نسبة المستثمرين في عقارات دبي ممن يتعاملون بعملات غير مرتبطة بالدولار الأميركي بين 40٪ و 50٪ ولذلك تبرز قوة الدولار كتحدي. ولعل اقرب مثال كان في انخفاض قيمة الروبل الروسي الذي أدى إلى تراجع الاستثمارات الروسية في سوق العقارات في دبي والتي عوضها إلى حد بعيد المستثمر الصيني.

3 الاستقرار السياسي

تتمتع الأسواق العقارية التي تقع في بلدان آمنة بنمو مستقر وذلك يظهر جليا في دولة الإمارات العربية المتحدة، في حين يتزايد قلق المستثمرين في اغلب الأسواق العقارية العالمية بسبب تأثرها بالتقلبات السياسية والنزاعات التي تضرب العديد من المناطق في العالم.

4 العرض والطلب

بلغ سوق عقارات دبي نضجاً واضحاً على صعيد التحرك وفقا للعرض والطلب ويتوقع أن يشهد 2017 توازناً بين العرض والطلب لاسيما مع مضي العديد من شركات التطوير العقاري بالتوجه لتلبية ذوي الدخل المتوسط وهي الشريحة التي تمثل أكبر فئة في قائمة الطلب على العقارات في الوقت الراهن.

5 التشريعات

أثبتت دبي بتطويرها المستمر للبنية التشريعية مقدرتها على حماية حقوق أطراف التعاقد عموما والمستثمرين خصوصا ويتوقع أن تواصل السلطات التشريعية تطوير الإطار القانوني في عام 2017 الأمر الذي يرفع مستويات الثقة بالسوق لاسيما سوق الإيجارات.

6 الرهن العقاري

يتوقع أن يساهم الرهن العقاري في زيادة نمو القطاع فقد كانت حصة صفقات الشراء الممولة بالقروض 30٪ -35٪ من اجمالي المبيعات لكنها زادت إلى 45٪ و50% تقريبا خلال 2016 وهذا يعكس ارتفاع ثقة المؤسسات والبنوك في قطاع العقارات ونجاح الأطراف في التكيف مع الآليات التي ظهرت في 2014 لتنظيم الرهن العقاري.

7 ثقة المستثمرين

تراجعت مستويات ثقة المستثمرين على مستوى العالم على خلفية التقلبات الاقتصادية والسياسية العالمية في السنوات القليلة الماضية. مستويات عدم اليقين المحيطة بالسياسات الاقتصادية والاضطرابات الجيوسياسية والتوتر الاجتماعي في العديد من البلدان في جميع أنحاء العالم افرزت جواً من التردد ومع ذلك، تمكن قطاع العقارات في دبي من المضي قدما بإجراءات تعزز ثقة المستمرين.

8أداء القطاعات الاستثمارية

عائدات الاستثمار في عقارات دبي لا تتوقف عند 7 وحتى 9 % سنويا في سوق الإيجارات بل يتجاوزه إلى زيادة القيمة الرأسمالية للعقار ما بين 5-7% سنويا في سوق البيع وتحديدا عقارات ذوي الدخل المتوسط والواقعة في مناطق دبي الجديدة واذا ما اضفنا إلى تلك العائدات ميزة حرية انتقال الأموال تصبح ثقة المستثمر بعقارات دبي محصلة طبيعية بينما يواجه المستثمرون في العديد من الدول قيوداً على ذلك الصعيد وكان آخرها الصين.

9 الإنفاق الحكومي

تواصل دبي الإنفاق على مشاريع البينة التحتية على نحو مستمر في إطار التزامها بدعم التنمية الاقتصادية وهذا يقود إلى اتساع رقعة عمليات التطوير الحضري من جانب شركات التطوير العقاري لاسيما – في المستقبل القريب- التي تلبي متطلبات استضافة اكسبو العالمي 2020 والذي بدوره سيدعم الاقتصاد ليسجل نمواً ما بين 4 – 3.5٪.

10 التسجيل العقاري

رسوم شراء وسرعة تسجيل العقارات في دبي تعد تنافسية على الصعيد العالمي، وأكدت أراضي دبي أنها لا تعتزم زيادتها ، ومن المتوقع أن تستمر وتيرة عروض القيمة المضافة كخطط الدفع الميسرة من قبل المطورين وعروض البيع التي تتضمن رسوم التسجيل المدفوعة من قبل المطورين مما سيزيد من جاذبية قطاع العقارات في دبي للمشتريين النهائيين والمستثمرين.

REITS… preferred by some investors

In November of 2016, Saudi Arabia created its local version of a Real Estate Investment Trust (REIT). The reasoning behind this move was to enable the smaller investors to provide liquidity to the market and support government efforts to resolve a housing shortage and increase the percentage of housing generated by developers to 30 per cent from its current level of 10 per cent.

So, while there are advantages for the government to have financial structures such as REIT’s to support burgeoning property and construction industries, what are the advantages for the investors who will be providing the capital?

There was a time when the property game was for the wealthy investor and those with only small amounts to invest had to look elsewhere to invest their hard-earned capital. This is no longer the case due to the rise of new investment platforms which enable even the smallest of investors to enjoy the returns of investing in property.

One such platform which is relatively new to the local market is the REIT. REIT is an acronym for Real Estate Investment Trust which, as a trust company that accumulates a pool of money through an initial public offering (IPO), buys, develops, manages and sells real estate assets. The IPO is identical to any other security offering with many of the same rules regarding disclosure and reporting requirements and regulations.

Investors, whether large or small, instead of purchasing stock in a single company, have the opportunity to buy a unit which is actually a portion of a managed pool of real estate. This pool of real estate then generates income through renting, leasing, selling and financing of property and distributes it directly to the REIT holder on a regular basis.

Units held in a REIT can be bought like a stock on a stock exchange. The REIT invests in real estate directly, either by buying, selling or leasing properties or by investing in property mortgages.
There are 3 types of REIT’s. Equity REITs invest in and own properties and therefore are focused on increasing the value of those properties while also accumulating revenues from their properties’ rents. Mortgage REITs deal in investment and ownership of property mortgages. These REITs loan money for mortgages to owners of real estate, or purchase existing mortgages or mortgage-backed securities. Their revenues are generated primarily by the interest that they earn on the mortgage loans while Hybrid REITs combine the investment strategies of equity REITs and mortgage REITs by investing in both properties and mortgages.

Individuals can invest in REITs either by purchasing their shares directly on an open exchange or by investing in a mutual fund that specializes in REITs that are listed on the stock exchange. Among other things, REITs invest in shopping malls, office buildings, apartments, warehouses and hotels. Some REITs will invest specifically in one area of real estate – shopping malls, for example – or in one specific region, state or country. Investing in REITs is a liquid, dividend-paying means of participating in the real estate market.

REITS allow both small and large investors the ability to invest in real estate without investing large amounts of capital or devoting a lot of time in directly managing a property portfolio. A REIT also allows a greater amount of portfolio diversification because of the large amounts of pooled funds available to the REIT Management team enables the accumulation and operation of different types of property assets in different locales.

Investing in a REIT is no different to investing in any company. Some companies represent lucrative opportunities, while some companies may represent too much risk or poor value. Investors still need to look at the REITS performance in terms of Nett Asset Value growth and dividend payment history, current portfolio composition and performance, the management team, future plans for the REIT as well as have an understanding of the likely performance of the property market and overall economy in which the REIT participates. Investors, having completed a thorough and in depth assessment of the probability that the REIT will provide desired returns, can participate at the level that is consistent with what they can afford to invest.

Another investment platform which allows smaller investors to participate in the property market is Crowdfunding. A relatively new concept Crowdfunding entails the pooling of funds by a group of individuals to finance initiatives such as real estate investment projects. This is usually done via the internet.

The advantages are obvious. Investors get access to the real estate market with small amounts of money and can pick and can efficiently choose which Real Estate projects they wish to invest in, thereby spreading risk and enabling the possibility of building a portfolio made up of a variety of assets, in a variety of locations being developed by a variety of developers.

For developers, Crowdfunding provides another source of funding for their projects. Using the internet is an efficient way of attracting interest to their projects and the reach that the internet provides magnifies the potential for raising funds more quickly.

However, as with any investment, Crowdfunding is not without its risks. Obviously, investors will be exposed to any gyrations in the market along with all the other investors. In addition, the risk of default from developers can be higher when compared to peer-to-peer and direct real estate investment funding. In addition, unlike investing in a REIT, the absence of a secondary market restricts the ease with which an investor can liquidate his or her position. These risks need to be considered carefully when determining the type of return required and, as with any investment, extensive due diligence by all investors, regardless of whether they be big and small, is of paramount importance.

Structural Shift

It is always a very promising sign when an industry demonstrates the flexibility and resilience to undertake a structural shift when market requirements change or develop. This is exactly what has happened in Dubai’s property and real estate industry.

It came as no surprise to those that take a broader view of the industry that calls from a variety of industry participants including the government, banks and the more visionary industry observers for more affordable housing in Dubai had gathered volume and intensity over the past few years. In so doing, there was a recognition that the most important investor in Dubai’s Real Estate market had been forgotten too often by developers and brokers and that a refocusing on building affordable, robust and sustainable communities to be inhabited by the average family living frugally on an average salary was of irrefutable importance if Dubai’s economy was to develop and grow to the next level.

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 only recently have they attracted focus in Dubai’s rapidly maturing industry which is more proportionate to their importance.

Owner occupiers see Real Estate in a different light. Typically they are normal people, not overly wealthy, who are concerned with providing the family with a future. For them, it’s about creating a lifestyle. Its 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.

Healthy, vibrant and progressive communities are built around the stability that owner occupiers bring. They are less likely to migrate to another neighborhood and are more concerned with regards to the overall well being of the community that they are part of. They establish relationships that strengthen the fabric of a community which itself can become a powerful voice for progress.

And these communities are now springing into life all over Dubai. Communities such as Skycourts, Q Point and Motor City in Dubailand have shown how rapidly communities can develop and grow to provide a lifestyle that belies their affordability.

So who needs to ensure that this most important consumer segment is catered for in an industry which can be notoriously out of touch with consumer requirements? Well, just about everybody who plays a role in our industry but, more significantly, the government, the financiers and the developers. And given the results of 2016, they are to be congratulated for initiating the structural shifts that we are witnessing.

The dialogue regarding the dual objectives of affordability and profitable sustainable growth for the real estate sector must be ongoing as a continual and constant review of possible initiatives and regulatory actions that will ensure that the considerable progress already made and foundations laid in strengthening and modelling the industry is continually built upon. The health of the industry is too important and the issue of affordability is critical to the broader economy as well. Dubai can ill afford becoming cost uncompetitive in the global market in the lead up to the 2020 World Expo.

For any Real Estate market to function efficiently and effectively, it requires a banking sector which is also functioning efficiently and effectively. Banks play a fundamental role in enabling prospective home owner occupiers own a piece of Real Estate. If you consider that in most global markets, anywhere between 65% and 85% of residential property transactions involve some form of financing, and reflect on the fact that in Dubai the number of residential property purchases financed by mortgages in 2016 was around 50% there appears to be plenty of scope for more growth. This number is actually up from the 33% historically seen in the emirate so it appears that the banks are discovering the formula of providing accessible finance to a broader consumer base without taking on excessive, whether real or perceived, risk.

Developers have come a long way in providing greater supply of affordable housing. To their credit, they now have a deeper understanding of what is required by this segment of the market. They themselves have improved in providing recognizable value, emanating from a greater focus on the customers and their requirements and value expectations. Some have demonstrated innovative approaches to delivering affordable solutions which are valued by the customer, and done so profitably.

Virtually every industry has faced this challenge over the last 5 decades and many have demonstrated that giant strides in the provision of true value while retaining healthy margins is possible. Dubai’s property Industry will continue to follow a similar path in 2017.

WHY TRUMP WILL MATTER IN 2017

I read other day that Dubai developer Damac Properties has confirmed that work on its major golf-course projects including the Trump International Golf Club Dubai are on track. Good news indeed!
Regardless of what you think about Donald Trump, he has established an immediately identifiable global brand and there is no doubt that he will influence the economy of Dubai and, more specifically, the property industry here.

But I am not talking about the Donald who “dabbles” in real estate, construction, hospitality, entertainment, book and magazine publishing, media, model management, retail, financial services, board game development, food and beverages, business education, online travel, airlines, helicopter air services, beauty pageants (etc. etc.) here …

… I am talking about the next President of the United States or POTUS.

As POTUS, decisions (and Tweets for that matter) made by Donald will influence the strength of the US Dollar which just so happens to be one major issue that is likely to face Dubai’s Real Estate Industry in 2017. Already, the campaign promises, rhetoric and ubiquitous tweets have already given rise to the “Trump” effect and, combined with the US Federal Reserve interest rate increase of December 14, has already driven the USD to its highest level in almost 15 years.

What’s more, it is likely that, given the Feds intention to embark upon at least 3 interest rate hikes in 2017, the USD will remain at this elevated level for at least the first 6 months of 2017 which is likely to dampen the amount of investor capital that flows into the property market.

A strengthening US dollar, in an industry where 40% of purchases are made by investors that hail from countries whose currencies float freely, could have significant effects.

Potential investors from India, Pakistan and China will find it more expensive to invest in the emirate, just as Russian investors have over the past 3 years as the ruble devalued.

A strengthening US dollar will also make property in other markets such as the UK, Asia or Europe more attractive, essentially putting pressure on the amount of capital being invested in Dubai.
Meanwhile, it appears that the on-going saga of the Brexit implementation is likely to carry on for some time, probably leading to a continuance of a weak British pound for the foreseeable future. The local property market is likely to continue to feel the pressure of the Brexit effect.

So, what is the likelihood of a strong USD in the first half of 2017? … very likely !
But it isn’t all doom and gloom … far from it.

What happens in the latter half of 2017 is a bit more of a mystery but, already, pundits are saying that the Trump effect will not last and that his campaign promises regarding fiscal, trade and immigration policies will be very difficult to achieve.

If so, and given the Federal Reserve’s history of changing course on predicted interest rate hikes, it is not unlikely that we could see a weakening of the USD sometime on the latter half of 2017. Once we get clarity on the likelihood of this occurring, we could see confidence growing amongst investors and capital flows reverse, to the benefit of the local market.

From a macro level, Dubai needs people to support an economy that is expected to grow at a targeted 4%+ in 2017 and beyond. Underpinning this growth trajectory is a commitment and determination to deliver on initiatives such as the 2020 World Expo and, in 2017, we will see the countdown to 2020 and the massive infrastructural investment associated with the event markedly gather pace.

While Dubai’s reliance on oil is minimal due to its economic diversification initiatives, the recent OPEC (and others) agreement to cap oil supply resulting in in higher oil prices is, nevertheless, welcomed. This augers well for a return of the Russian investor whose ruble has been the best performing currency for the last 3 months but should also see increased capital being available to local investors.

Tourism and trade is flourishing in Dubai and the focus of spending has been on new projects to grow these important revenue generating economic segments and further diversification. The launch of 2 major theme parks in 2016 will ensure Dubai attracts over 15 million visitors in 2017, continuing a growth trend of approximately 10% per annum since 2010 and is well on track to attracting over 20 million visitors in 2020.

So, I see 2017, the first year of Donald’s reign as POTUS, as being a year of two halves … first half of the year being really a continuation of the market uncertainty that has been such a characteristic of 2016, as the world comes to grips with what the new POTUS can actually achieve …

… while the latter half of 2017 to be more positive, with an increase in investor confidence and therefore investment activity, property values and first home ownership as the tangible and real effects of world events, such as the US elections and Brexit, that so surprised us in 2016, begin to become more apparent and the risks associated more assessable.

Rather sooner than later, I think!

Investing in 2017? Five key points to ask

1- HOW MUCH DO YOU REALLY KNOW ABOUT PROPERTY AS AN INVESTMENT?

You must have some knowledge about any investment that you might be considering. Property is no different. The old adage of “Don’t invest in anything you don’t know” applies. You may not be an expert, but you need to be able to communicate intelligently and knowledgeably with the experts.

Do some homework on the industry and gain an understanding of where the industry is now, where it is headed and what is driving its direction and development. Get a feeling of its composition and what it has to offer you in terms of wealth generation opportunities, how you might be able to engage those opportunities and when you envisage starting your foray into the property investing space.

It’s difficult for anybody to accurately assess opportunities and the risks associated with those opportunities if they have little knowledge of what it is they are investing in.

2- ARE YOUR INVESTMENT OBJECTIVES CLEARLY DEFINED AND WELL CONSIDERED?

As with any investment, investing in property is all about recognizing and capitalizing on opportunities that are consistent and supportive to your overall wealth accumulation objectives.

You must have a clear understanding of what you are trying to achieve and what role your property portfolio will play within a larger diversified investment portfolio. What proportion of your total investment portfolio is allocated towards property? towards stocks or bonds? towards gold or commodities? etc.

The only person who can determine what you are trying to achieve is you so be sure you know you’re your objectives are before doing anything.

3- WHAT IS YOUR SOURCE OF FINANCE?

Needless to say, investing in property is often a capital intensive exercise and, depending on your strategy, returns can be subject to relatively long lead times. A sufficient and robust finance plan is essential.

What is your source of finance and where do the greatest risks lie in the event of an economic downturn or change in circumstances? How liquid might you need to be? How exposed will you be to interest rate increases and or exchange rate fluctuations? What level of gearing or leverage are you comfortable with? Will you be able to preserve capital invested in your property portfolio during cyclical swings in the market or will you need to move capital among portfolios?

All these questions (and many more) need to be addressed and the more skillful you are at conceptualizing your wealth generation schematic, the greater your likelihood of generating successful strategies to grow your wealth.

4- DO YOU HAVE A FINANCIAL ADVISOR? (THAT YOU TRUST)

I always recommend that clients consult with a financial advisor prior to embarking upon the purchase of a property.

Investing in property requires careful planning and a clear understanding of what it will entail; the effects it will have on lifestyle, the risks it may pose, the stresses that may emerge while, at the same time, the benefits of generating wealth in, what can be, a very lucrative industry . A financial advisor can help you understand and assess all these elements by helping you determine what you actually need to do (or do without) to achieve your objectives.

Ask yourself if you know definitively what you can afford, how best to use available finance, how to accurately assess alternative investment options, how best to utilize your current assets and how investing in real estate is going to enable you to grow your wealth in the future. A financial advisor will view your investment as one part of your overall financial landscape and should be able to guide you into committing the right type and the right amount of resources to acquiring that dream home that everybody aspires to.

As with any investment, investing in property is all about recognizing and capitalizing on opportunities that are consistent and supportive to your overall wealth accumulation objectives.

5- DO YOU HAVE A TEAM OF PROFESSIONALS (THAT YOU TRUST) WHO CAN ASSIST YOU IN YOUR QUEST?

Are you able to identify, engage and work with a professional in the industry? Do you have the skill to select the right agency? Do you know what separates professionals that will provide you with tangible added value rather than simply line their pockets with your money? It’s up to you to choose wisely and remember, cheapest is not always best.

Do you know where to find an experienced and passionate team with people who really enjoy what they are doing? An agency that exhibits a breadth and depth of industry knowledge and expertise? This is important.

Look for longevity and evidence of good relationships with key industry stakeholders such as the major developers or authorities such as the Dubai Land Department, RERA, DEWA or Economic Department.

And finally, look for an agency that has received some form of Industry or peer recognition. These are the hardest plaudits to get!

WHY THE DUBAI WATER CANAL PROJECT IS SO IMPORTANT …

Most of us have been witnessing the considerable construction efforts that have been underway in completing the Dubai Water Canal project. With an impending completion date of 2017, the canal which will run from Business Bay into the Arabian Gulf and include four hotels. An estimated 450 restaurants, new luxury housing developments, waterfront developments and extensive public spaces, this latest addition to the ever-changing Dubai landscape is the latest stunning achievement by the emirate.

While many people will marvel at the imagination and sheer scale of the project, very few will comprehend what a wide variety of benefits such a project brings to the emirate of Dubai, especially those which relate to the Real Estate industry.

For a start, the investment in the local economy will top 2 billion dirhams. Projects of this scale are of huge benefit to the local economy and the prosperity that is generated among businesses is essential to maintaining economic vibrancy and, logically, the demand for commercial real estate as well as residential real estate for those who are involved, contracted or employed to bring the project to its conclusion.

Then, of course, is the added value that the project itself brings to the real estate that borders the actual canal itself. Property developments situated on both banks of the canal will be comprised of over 5,000 residential units in addition to over 900 hotel rooms. The addition of these properties to the city’s “balance sheet” in the form of a new upmarket residential community and tourist destination situated in such a prime location are sure to grow in value, especially as the estimated 80,000 square meters of leisure areas, public places and facilities are completed.

The waterfront development will enable a lifestyle that will be the envy of many. Residents will enjoy a 5-kilometre boardwalk which will boast a vast array of food, beverage and retail outlets and tourists will participate in the vibrancy and excitement of what is sure to become a favoured destination for many. Running tracks, viewing areas and marinas will only add to the appeal of an already famous Jumeriah district which will be further enhanced with the re-opening of the Jumeriah Beach Park.

However, it is not just the waterfront properties that will benefit from an upward value adjustment. Any property which is within an easy walking distance of the waterfront attraction or newly reopened beachfront will reap the inevitable rewards of being located within proximity to the latest attraction in Dubai. Those existing owner occupiers living close to the canal, who have been affected by the projects construction, will reap the rewards of their patience and tolerance with the sharp increase of the values of their properties.

Meanwhile, the project will help ensure that tourism will continue to play its part in driving Dubai’s economic growth. This project is just one of a slew of new projects to grow this important revenue generating economic segment. Predicted by Mastercard’s Global Destination Cities Index to be the 4th most popular destination in the world by year end, Dubai will have welcomed almost 16 million overnight visitors in the by the close of 2016. This will represent a 12% increase over 2015 and continue a trend of approximately 10% per annum since 2010. The canal project represents just one more compelling reason to visit Dubai and the requirement for real estate to support the commercial activities that tourism will give rise to is only bound to increase.

And of course, all that increased tourism will require people to service it. They, in turn, will require accommodation. Such mega projects have definite effects the population growth of the emirate and population growth is the pre-requisite to real estate and property industry growth. This is where the Dubai economy has an advantage over many western economies in that, looking forward, there is a requirement for intellectual and human capital which is not residing dormant and unutilised in the economy and attracting this critical resource can only result adding to economic growth, providing additional impetus for Dubai’s Real Estate industry to enjoy the predictable surge in demand for accommodation and commercial space of all types, from labor camps to offices to warehouses to apartments to executive Villas. That demand, however, can only be created with the incremental economic activity that the initiatives such as the Canal project can provide.

Investors are already showing lots of interest in the project which is not surprising. Other projects that have been developed with a water based lifestyle theme such as The Palm, Dubai Marina and the adjacent Jumeriah Beach residences have done remarkably well and proven popular with both local and overseas investors. They all share one common characteristic … they offer wonderful lifestyles and the Canal project will be no different. The project is already demonstrating significant potential to satisfy the appetite for investment returns and the fundamental reasoning is compelling.

2017 – A Year of Transition

I will remember 2016 as a year of uncertainty with the occasional splash of surprise combined with a healthy dose of bemusement. Ironically, I will also remember it as my most successful year yet.

So, what about 2017?

For investors, potential owner occupiers, developers or another industry stakeholder, 3 essential elements are of paramount importance in ensuring long term sustainable growth in an industry which itself, is a key ingredient to long term economic growth. The global events and developments of 2016 certainly challenged the strength of these 3 fundamental elements.

They can be identified as the 3C’s or, more specifically, Capital, Confidence and Clarity. The 3 C’s are interdependent whereby a shift or change in any one element will affect the other two. The relationship between all 3 C’s can be either positive or negative and can lead to a multiplier effect on growth or can increase the rates of contraction or decline.

Any forecast for the Dubai Real Estate Industry for 2017 needs to consider these fundamentals and how external and internal events and influences will affect them.

The major issue that is likely to face the industry in 2017 is a strengthening US dollar which, in an industry where 40% of purchases are made by investors that hail from countries whose currencies float freely, could have significant effects. Potential investors from India, UK, Pakistan and China will find it more expensive to invest in the emirate, just as Russian investors have over the past 3 years as the ruble devalued.

A strengthening US dollar will also make property in other markets such as the UK, Asia or Europe more attractive, essentially putting pressure on the amount of capital being invested in Dubai.

The likelihood of a strong USD is significant. The combination of the already evident “Trump” effect and the US Federal Reserve interest rate increase of December 14 already has already driven the USD to its highest level in almost 15 years. It is likely that, given the Feds intention to embark upon at least 3 interest rate hikes in 2017, the USD will remain at this elevated level for at least the first 6 months of 2017 which is likely to dampen the amount of investor capital that flows into the property market.

However, what happens in the latter half of 2017 is a bit more of a mystery. Already, pundits are saying that the Trump effect will not last and that his campaign promises regarding fiscal, trade and immigration policies will be very difficult to achieve. If so, and given the Federal Reserve’s History of changing course on predicted interest rate hikes, it is not unlikely that we could see a weakening of the USD sometime on the latter half of 2017. Once we get clarity on the likelihood of this occurring, we could see confidence growing amongst investors and capital flows reverse, to the benefit of the local market.

Meanwhile, it appears that the on-going saga of the Brexit implementation is likely to carry on for some time, probably leading to a continuance of a weak British pound for the foreseeable future. The local property market is likely to continue to feel the pressure of the Brexit effect.

But it isn’t all doom and gloom … far from it.

So, I see 2017 as being a transitional year for the industry with the first half of the year being really a continuation of the market uncertainty that has been such a characteristic of 2016. As at the time of writing, there were still too many unknowns in the world today.

However, I expect the latter half of 2017 to see an increase in investment activity, property values and first home ownership as the effects of world events that so surprised us in 2016, begin to become more apparent and the risks associated more assessable. In addition, the inevitable organic growth from a population increase within the emirate, which will emanate from the infrastructural investments and economic activity associated with the countdown to the 2020 Expo, will provide a welcome and long awaited boost to demand for property, of all types, throughout the emirate.

Buy, don’t rent!

We are all aware of the huge number of new jobs, estimated at around 277,000 that the Expo is expected to create. Therefore, it is fair to assume that there is going to be a steady stream of expats looking for places to live.

So, if you have recently landed in Dubai with a view to making it your home, you are the latest in a long line of expats who have come to the Emirate with a view to setting up an improved lifestyle for themselves and, where applicable, their families.

Dubai has a lot of attractions in addition to the lure of promising business and lucrative employment opportunities … beaches, restaurants, shopping, outdoor activities … even snow skiing! Dubai boasts a modern infrastructure and is regarded by many as one of the safest places for families to live in the world. In addition, being located advantageously for excursions to Europe, Asia and the African continent, it’s not hard to see why expats are intrigued as to what Dubai has to offer.

And as the Emirate has grown and matured, the average tenure of expats living in the emirate has been on the increase. This is due to a number of reasons however principal among them is the recognition by employers that 3 year employee tenures are inefficient and the recognition by expats that Dubai, when compared to many other places in the world, is actually a very good place to live.

With so many expats now considering living in Dubai for longer, an increasing number are contemplating purchasing a home instead of renting. For many, making this commitment can be a daunting prospect. There are many considerations such as budgeting and finance, asset type, area, fair values and timings to mention just a few. The added complication of living in a relatively new country and buying into an appreciating and strengthening market causes many to procrastinate over their Rent versus Buy decision.

So, as an expat, why buy your home instead of renting it? Some may re-phrase this question by asking “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 multiple years, will enjoy an inflation driven compounding effect on its value. This allows you to build your individual net worth through 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 time to contact a reputable Real Estate Brokerage to assist you in finding the right property. As always, stick to the basics. Think carefully about location, quality of the building, 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 is a good place to start. If you can also have close access to the metro, even better. These locations are more likely to provide a superior appreciation in capital value as well as riding out cyclical volatility with less distress.

If buying an apartment, you need to consider the effectivity 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. Be purposeful, persistent, patient and pragmatic in your approach and you are well on the way to making a very sound decision.

Mortgage trend in Dubai set to continue

There has been a very pleasing trend that has developed during 2016 which is yet another demonstration of the development and maturation of Dubai’s Real Estate industry.
The marked increase in the utilization of mortgages to purchase properties in the emirate demonstrates a market that has undergone a structural shift to supply more affordable properties and the maturation of buyers in structuring their financial affairs to obtain a mortgage and buy the home of their dreams. For the first t.

Historically, mortgages have represented no more than 30%-35% of property sales in the emirate. This ration has now climbed to over 50% during 2016 and, in some months, levels of 60+% were achieved.

This is great news for several reasons.

First, while this trend highlights 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 this lucrative market going forward.

The YEAR 2016 WAS NOT JUST ABOUT OIL

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

I believe that the malaise that was felt in Dubai’s real estate industry was due to a wide variety of factors, not just the price of oil and that considering oil prices alone is simply too one dimensional. The factors that have affected the Dubai property industry in 2016 are many, varied and, in some instances, quite complex.

Many investors had high expectations for 2016 but not many really expected 2016 to announce its arrival with such mayhem and drama. In short, most investors started the year peering into a fog of uncertainty with only continual negative headlines to guide their reasoning.

The issues in 2016 were as varied as they were significant. Everything from a U.S. presidential race that has the world bemused (and perhaps frightened as to its outcome) to doubts regarding the capability of China to effectively manage and steer its economy away from being export driven to relying on local consumption and the development of its middle class to a massive refugee crisis will continue as long as there is violence in the Middle East which, of course, shows little sign of abating.

Then there was the continuing saga of U.S. Federal Reserve’s shift from the near-zero interest rates that continued to spook investors to the extent that all rational and fundamental analysis enabling investment decisions seems to have been replaced by an intense and sometimes amusing focus on the vocabulary and grammar used in Fed statements in an effort find some hidden indication of its intent. Thankfully the Fed raised interest rates on December 14, putting to rest all the unnecessary speculation and pointless chatter that was crowding the airwaves.

Meanwhile, the ongoing collapse of oil and commodity prices had threatened to trigger recessions in emerging economies like Russia and Brazil all at the time that Europe continues to struggle for growth. Thankfully, OPEC and a few other oil producing nations such as Russia finally came to some agreement to cap supply after realising that unbridled production in pursuit of long term market share was beginning to destroy some economies.

Then of course, there was Brexit, the effects of which will be as diverse as they will be complex… if only they can figure out how to do it! Experts are still unsure as to how the decision made by the majority of Brits will affect everything from the European geo-political and socio-economic landscape, the strength and resilience of the European Union in the face of further discontent within its member states, the social and economic ramifications to a newly “independent” United Kingdom and the inevitable question as to whether the United Kingdom can remain united given the Scottish and Northern Island wishes to continue as part of the EU. The pound has plummeted and is likely to remain subdued for some time.

Not surprisingly, the IMF trimmed its global growth outlook for 2016 to 3.1 percent, down from 3.6 percent, however it is forecasting 3.4 percent for 2017.

So, what could an investor do in 2017? … mired in the depths of despair and confusion at the deluge of negative headlines, Trump tweets and seemingly shallow financial advice and at the direction of global economies and financial markets, and feeling clueless as to where the opportunities for returns on his hard-earned capital might be?

Well, investing in Dubai Real Estate has still provided significant potential to satisfy the appetite for investment returns and the fundamental reasons are compelling.

As detailed above, an economy growing on the back of strategic commercial and infrastructural initiatives unique to the region driving population growth of 7% annually makes investing very interesting, particularly when taking the medium to long term view.

Tourism and Trade are flourishing in Dubai and the focus of spending has been on new projects to grow these important revenue generating economic segments and further diversification. The launch of 2 major theme parks in 2016 will ensure Dubai attracts over 15 million visitors in 2017, continuing a growth trend of approximately 10% per annum since 2010 and is well on track to attracting over 20 million visitors in 2020.

Then, continual diversification of the economy provides reduced risk and is the language of economic planners now, not oil, and any risk is well compensated for by superior returns with rental yields in Dubai being among the highest in the world with the added advantage of favourable tax conditions for most investors.