Property Times

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.

Meet Dubai’s own Wolf of Real Estate

By:Binesh Panicker
Published: Property Times
Date: 28 August 2016

Mohanad  Alwadiya is a well-known name in the Dubai real estate market, and he wears many hats. Apart from his professional obligations as the CEO of Harbor Real Estate, he also finds time to contribute to the betterment of the market as Senior Advisor & Instructor at the Dubai Real Estate Institute. He is already a raging hit on social media, not an easy task for someone
from real estate.

Tell us about Memaar. How did the concept take off?
Having a primetime property reality TV show in the Middle East has been a long time coming – whether you’re in the UAE, Saudi Arabia, Qatar – practically anywhere in the Middle East, there’s always a new tower, a unique residential project or a new iconic building being launched or unveiled. So MEMAAR simply had to be.

MEMAAR is the brainchild of the Dubai Channels Network (DCN), and we officially went on air for Season 1 in May 2015. We already have a solid audience following comprising millions of viewers from all across the GCC and beyond. When it comes to our guests, we always select real clients from different backgrounds and objectives in order to offer various enriching perspectives.

The show’s objective is to educate, entertain and engage viewers with the real estate sector. I’m overwhelmed with the amount of positive feedback that I receive on a daily basis from viewers from all over the world praising the show and seeking my advice. The show is now broadcasted weekly on Dubai TV every Wednesday at 7pm, Sama Dubai TV every Sunday at 9pm and Dubai One TV (with English subtitles) every Monday at 8pm with multiple repeats on all the 3 channels.

What are the future plans for the show?
After the tremendous success of the first and second seasons, we’re going full-blast on a multimedia level. We have a lot more in store for our ever-growing number of loyal fans.
We are currently shooting for Season 3, with 16 new exciting guests and episodes. The show started broadcasting on Dubai One TV with English subtitles and will continue to run on Dubai TV and Sama Dubai TV. Of course, we want to keep growing and developing, always mindful of the feedback we are getting from our MEMAAR fan base.

You are popularly known as “The Wolf of Real Estate,” which made you a huge hit in social media. Tell us more about your social media presence and its effect.

Thanks to Property Times back in 2014, I got the “Wolf of Real Estate” title given to me which has proven to be a very interesting and strategic form of branding for myself which I have, yes, fully embraced – that is, minus the negative connotation associated with the more famous moniker for Jordan Belfort – “The Wolf of Wall Street.”

However, I believe the moniker emanated from the work of our company, Harbor Real Estate, having been previously referred to as a star that emerged from the last GFC. Beyond having simply survived, it was during the GFC that Harbor Real Estate, in the face of a level of adversity that the industry had never witnessed before, really grew as a real estate enterprise of significant capability and standing in the industry.

In terms of my current social media presence, I do have more than 1,300,000 followers on my public Facebook pages, almost 40,000 followers on my “The Wolf of Real Estate Official” Instagram account, and 515,000 followers on my “Mohanad Alwadiya” official Instagram account. On Twitter, I have a little over 50,000 followers on Snapchat and over 10,000 connections on LinkedIn.
I get all sorts of positive and encouraging comments and messages on different social media platforms, such as those expressing their gratitude for the information and analysis I provide on the TV show, articles I write or social media posts. I also receive a lot of messages from followers asking for my opinion about certain issues or real estate advice. As for the unusual ones and even those which appear negative, I usually just take them with a grain of salt and try to respond positively. In general, I try to answer all the messages I receive as much as I can because I really enjoy the interaction with all my followers, and this allows me to stay in touch with the market and gauge the impact of the various activities I’m involved in.

The response from people via social media has been overwhelming and I am still trying to get used to being referred to as some sort of celebrity in my own right because, frankly, I don’t consider myself a celebrity… just the facilitator of the reality TV show MEMAAR… just doing my job!

What is your ultimate dream?
Well, there’s a lot of things on my mind, and so much that I wish to do! However, the realities imposed by time makes careful prioritization essential.
I’m currently working on a portfolio of development projects and initiatives. Harbor Real Estate continues to expand and is continually developing the capability to provide industry leading service. I call this the “never-ending initiative” as every individual or organization can always improve regardless of past achievements.

From a business growth perspective, there is plenty to be excited about. We have several new projects and unique services that will be launched very soon and we are looking forward to Cityscape to allow us to share these with investors and aspiring homeowners.

Meanwhile, I am also at the final stages of publishing my first bilingual property management book and will be working closely with the Dubai Real Estate Institute on introducing an advanced version of the certification property management course.

There are many other ideas and initiatives that I wish to develop after 2016. I still believe our industry can benefit and better serve our customers by adopting and applying technologies in the areas of product development and communications. The world has become a global marketplace but I still believe that global capital flows in our industry are still hindered somewhat because we do not do a good enough job of putting enough global investors in a position of confidence and certainty. There remains a lot of potential in this space I believe.

Then of course, there’s MEMAAR. As mentioned earlier, we’re all working together and collaborating on how we can keep the show growing and developing, so it only gets better every season.

What is your take on the next few months for Dubai market? There is a general feeling of positivity among agents. What is the reality?
Everyone knows that Dubai real estate has been undergoing correction for quite some time now. We feel that the decline in values associated with that correction has halted or virtually halted in all market segments, or that the market is bottoming out. In Q1 of 2016, we have already witnessed significant growth in investor activity and strong land sales. Both are leading indicators that the market is heading into its next cyclical phase. We at Harbor believe that by the end of 2016, the market will have entered its next phase of growth which is expected to accelerate as we draw ever closer to the Dubai World Expo in 2020.

PROFESSIONALIZING THE REAL ESTATE PRACTICE

By Mohanad Alwadiya
CEO, Harbor Real Estate
Senior Advisor & Instructor, Dubai Real Estate Institute
Published by: Property Time Magzine

During the years marking the last global economic recession, reports on fraudulent business practices and shady dealings in real estate became quite rampant, and people (investors and end-users) realized that those who fail to practice due diligence have nothing to gain in a relatively new and still-emerging albeit rapidly growing property market.

Now, even as the UAE economy as a whole continues to lag from its earlier predicted level of activity, the real estate industry, in spite of the industry-wide slowdown, continues to earn its share of winners and non-gainers in terms of current industry practice.

Some individuals still manage to pose as agents or real estate representatives, produce fake documents, and get away with the money virtually scot-free. And while the government has put in place strict protocols whether it be in professionalizing industry practices or instituting new policies and regulations to guard the best interests of the market, there are still a few unscrupulous individuals who manage to prey on buyers, even tenants.

The term “business ethics” is not something alien or new to us, but some people with careers outside of the real estate realm may view the term with a heavily critical eye, with some perhaps even joking about the incompatible nature of the words “business” and “ethics.”

But we all know that in real estate, a number of professions emerge including, but not limited to: commercial or residential brokerage, appraisal/valuation, property management, real estate counselling, etc. That being said, for a job to be considered a bona fide profession, it would require some commitment to a certain standard of conduct that the general public expects from the practitioner. This is where the real estate code of ethics comes in.

However, some might say: but anyone can become a realtor, so how does this seemingly “open” industry professionalize current practice and regulate the activities of real estate practitioners? What rules or structures are in place to prevent any form of abuse and/or malpractice in an industry where sometimes morally contradictory relationships or grey areas exist such as in the case of open market listings where one seller lists with various agents, and the big question is where would the realtor’s loyalty be – with the seller or the buyer? Or in the case of valuation assignments where the client may indirectly or even expressly makes known to the appraiser the outcome they are expecting.

Another dilemma confronting realtors is their reliance on commission-based remuneration whereby agents’ dependence on said commission may run counter to the best interests of the client. While a good commission structure would evidently motivate realtors to give their best efforts in order to successfully convert a lead and close a deal, the question of whether or not conditions set are for or against the best interests of their client remains – with yes being the answer in some cases, and at other times not so especially in cases of self-dealing in real estate.

Aside from By-law No. 85 “Regulating the Real Estate Brokers Register in the Emirate of Dubai” which expressly states the legal mandate governing the real estate practice, the Real Estate Regulatory Agency (RERA) and the Dubai Real Estate Institute (DREI) established a mandatory certification program for new and experienced agents who wish to work in a real estate brokerage in Dubai. The DREI also organizes license renewal courses and exams along with a very rich variety of career development programs intended to help elevate the standards of professionalism and effectiveness of brokers in Dubai.

All realtors are, therefore, expected to abide by local laws pertaining to the real estate practice as well as to government regulations that are periodically introduced and, at times, go through a series of revisions or reforms in order to address new issues or problems that crop up every once in a while.

But even in the face of such regulation, real estate firms must also take it upon themselves to continuously educate and empower their agents to make the best decisions in order to maintain individual and corporate integrity, professionalism and, ultimately, success in the real estate business.

Investing in training, whether in-house or otherwise, definitely pays a huge dividend. Extensive and tailor-made training programs should include education on the industry and pertinent rules/regulations (especially on current or new legislation), soft skills and specialized training courses that help employees attain a level of mastery in all the macro and micro aspects of their profession.

The ongoing development of the industry’s regulatory framework and implementation of laws and regulations to safeguard both consumer and investor interests, the overall industry and the economy at large from rampant and irresponsible speculative, predatory or unethical practices, all reveal a mature and balanced approach to shaping an industry which exhibits sustainable growth over the long term.

Taken altogether, the laws of the land serve as the primary push for realtors to act in a way that upholds and reflects the greater good while constant education through training, workshops, seminars and the like (whether mandatory or voluntary) help real estate practitioners internalize the values that must inherently pervade the system for the industry to thrive and continue to serve as one of the primary sectors supporting the UAE economy.

The Real Estate Regulatory Agency (RERA) and the Dubai Real Estate Institute (DREI) have set a mandatory certification program for new and experienced agents who wish to work in a real estate brokerage in Dubai. The Dubai Real Estate Institute also organizes license renewal courses and exams along with a very rich variety of career development programs designed to help elevate the standards of professionalism and effectiveness of brokers in Dubai.
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EMAAR… THE BUILDER OF ICONS

EMAAR_THE_BUILDER_OF_ICONS

By: Mohanad Alwadiya
Published: Property Times
Dated: May 2016

Since 1997, Emaar Properties has been pioneering the development of Dubai real estate by continually and consistently conceptualizing, designing and constructing quality master-planned communities across the emirate.

So integral has Emaar Properties been to the growth and development of Dubai that its own growth and emergence as one of the world’s most valuable and respected real estate development companies has been virtually synchronous with the emergence of Dubai as one of the world’s great cities.

By delivering established communities such as Arabian Ranches, Emirates Living, and Dubai Marina, Emaar has played a major role in establishing the bedrock for supporting the lifestyle that Dubai offers today. But all that was eclipsed when it delivered its flagship development, Downtown Dubai, home to the iconic Burj Khalifa, The Dubai Mall and The Dubai Fountain. Not only did it provide what is now the world’s leading lifestyle destination, but it also reshaped Dubai’s skyline forever, and gave it a profile which is recognized around the world.

And that skyline is about to change significantly, once again, with the announcement of the construction of a stunning new architectural icon, the latest exciting development by Emaar.

The icon will simply be known as “The Tower” and its design was chosen by His Highness Sheikh Mohammed bin Rashid Al Maktoum, UAE Vice President and Prime Minister and Ruler of Dubai, a design which draws inspiration from the lily and evokes the image of a minaret, which is a common feature and distinctive aspect of Islamic culture and architecture.

The location of The Tower is an important reminder of Dubai’s past as it will be constructed on the Dubai Creek, the cradle of Dubai’s history and culture. This astute choice of location will forever mark the origin of Dubai and remind all of the humble beginnings of what has now become a remarkable story of vision and growth, amply demonstrated by the 6 square kilometers of world-class master-planned development that will have The Tower as its centerpiece.

Not only is the site historically significant, but it is also located in close proximity to the Ras Al Khor National Wildlife Sanctuary, protected under the UNESCO Ramsar Convention, and home to over 67 species of water birds.

And, as with all great icons, The Tower has a reason for being, and is envisioned to be of symbolic significance to, not only Dubai and the UAE, but also to global visitors hailing from all across the world.

Mohamed Alabbar, Chairman of Emaar Properties, said: “The Tower in Dubai Creek Harbour is our tribute to the positivity, energy and optimism that Dubai and the UAE celebrate, led by a leadership committed to all-round progress. A shining beacon of hope for the world, celebrating diversity and human achievements, this new iconic landmark further highlights the country’s ambition and futuristic vision, and enhances our nation’s pride. It will be the destination for the world to visit, enjoy and celebrate life, as Dubai prepares to host the Expo 2020.”

He also added: “It integrates, not just design excellence but also strong environmental and smart-tech considerations. With The Tower, we are delivering a compelling destination that will add long-term economic value to Dubai and the UAE. It will also position Dubai Creek Harbour as one of the most desired residential, leisure and touristic attractions, providing visitors and residents with a modern, luxurious and sustainable environment in which to live, work, learn and entertain.”

As an iconic structure, The Tower will provide a clear and bold symbol of a people’s culture, aspirations and ambitions. It will be representative of a vision of progress that has global relevance and benefit demonstrated through innovation, growth and development.

Every nation or great city has some symbolic architectural icon which helps to define either the history, vision, cultural values or characteristics of the people that inhabit it… whether it be the Statue of Liberty, The Eiffel Tower, The Shard in London, The Sydney Opera House, or even St. Basil’s Cathedral in Moscow… they are all symbols, and all of us have grown to accept those structures to be symbolic, in some way, of the cultures that they uniquely represent.

In my mind, I believe The Tower will represent the pride of a nation, an unmistakable reminder of what has and can be achieved regardless of how humble the beginning… of how people, corporations and governments, united by a shared vision, can play a role, share the burden and eventually mutually benefit from progress, and the desire to improve and achieve.

And it comes as no surprise to me that Emaar, with its pioneering spirit and continued significant contribution to the development of this amazing city of Dubai, should be the driving force behind this wonderful initiative, for it is Emaar, as an organization, that harbors and exhibits all the qualities that The Tower has been designed to symbolize.

Property portfolio resilience through diversification

PROPERTY PORTFOLIO RESILIENCE THROUGH DIVERSIFICATION

By Mohanad Alwadiya
CEO, Harbor Real Estate
Advisor & Instructor, Dubai Real Estate Institute (DREI)
Published in Property Weekly

It’s true, when people say “the world keeps getting smaller every day.”

Communication and information sharing across great distances and involving large amounts of data take place in a matter of seconds, and the devices we use and ways by which we transmit data keep evolving as we speak. Indeed, many human activities have become highly mechanized and are being performed at supersonic speed; though sadly, life is no less complicated. And economics, no less.

Even with the development of sophisticated software intended to calculate risk, analyze data or predict the impact of policies and economic decisions, e.g. ADePT, Minsky, PI+, SAS/ETS, etc., mankind is still at the mercy of structural or systemic shifts that continue to shape and reshape the global geo-political and economic ecosystems.

So, even with all scientific and technological innovations on hand, we continue to face uncertainty. How, then, does real estate investment – a major economic sector affected by such changes – figure? How do investors protect themselves from financial obscurity when the trade winds start to blow in a less-than-favorable direction?

The answer – portfolio diversification.

The advantages of diversifying your investment portfolio across a variety of asset classes such as stocks, bonds, property and cash has been well-chronicled. What most investors don’t understand that diversification within each asset class can also provide significant benefits.

The majority of my clients are comfortable with investing in residential property because most have rented or bought a property for their own use and therefore understand what that experience entails. However, very few have actually had a similar experience with commercial property and, therefore are a little less confident in investing in this potentially lucrative segment of the market.

So, why consider investing in commercial property?

Commercial property can add diversification to a property portfolio. Segments within the Real Estate market rarely move in tandem and a mixture of residential and commercial property can make an overall portfolio more resilient to inevitable market cycles.

All things being equal, commercial properties generally produce an ROI at least double that of residential properties. This is mainly due to lower per-square-foot capital cost but also reflects the higher levels of risk associated with owning commercial property.

Managing tenants in a commercial property is also more straightforward. You will have a business-to-business relationship with your tenant and many of the emotional issues which can complicate residential leasing arrangements won’t exist. It’s easier to keep interactions professional and focused and relationships are built over time with the opportunity to attract a ‘blue chip’ tenant and are likely to rent your property for a long period of time and less likely to default on rental payments. In many cases, commercial tenants and property owner interests are aligned. The tenant wants an efficient operation which presents a favorable impression to his customers, business associates or peers and, in this way, is more likely to assist the owner maintain or even improve the property.

Establishing a true value of the investment is often easier with commercial property. Reviewing the current owners’ income statement and existing lease details will provide a good indication of the likely future cash-flows and help to establish an accurate valuation.  Residential properties are often subject to more emotional pricing or developer inefficiency and cost recovery considerations.

Lease variations abound with commercial properties. The requirements of a tenant operating a high turnover major regional distribution and logistics center for non-perishable goods will be vastly different of those of a tenant who requires refrigerated goods storage to supply local retail outlets in shopping malls. In addition to lease rates and periods, negotiations can include such items as maintenance, implementation of storage and logistical systems, provision of office fit-outs, insurance, lease-to-buy provisions and options – the list goes on.

However, there are some possible downsides that the investor should consider.

Let’s use a warehouse as an example. As most commercial leases are of a duration exceeding two years, with many being of five years duration with options for an additional term of five years, it could take some time to find a new tenant for the warehouse.  Additionally, your current tenant may vacate due to tough economic conditions. Residential property can be resilient when it comes to economic factors over the long term and finding new tenants is not as difficult.

As the lease for each commercial facility can be negotiated with flexibility only limited by law, owning a portfolio with numerous commercial properties can be time-consuming and complicated. You will need professional help if just to handle issues such as maintenance and emergencies. Remember, your clients are in the business to make money and will be relying upon you to address any issues that arise with your property immediately. They, like you, do not want to forgo any revenues or incur any costs because of a problem with the property or premises that you provide.

Purchasing a commercial property of a size that can generate significant cash flow will typically require more capital upfront than a residential investment. Also, as the scale or size of the premises can be huge, unexpected repairs or major maintenance items can also be very expensive. This requires careful provisioning for expenses and emergencies when calculating lease rates and free cash flows for re-investment.

There is a greater array of physical and safety risks associated with commercial properties. Warehouses, for example, are often frequented by trucks, forklifts or other heavy machinery which means damage can be substantial from accidents. Having proper insurance is a must, not only for damage to premises and systems, but also in the event of personal injury or death where you, as the owner, can be held liable. Remember, your investment is actually operating as a commercial venture and can receive high volumes of people traffic.

As usual, greater returns will attract greater risks, however, as part of an overall balanced investment portfolio, there is no doubt that commercial space can be very lucrative indeed.

Portfolio diversification is a time-tested way of recession-proofing your investments by ensuring that not all of your wealth is invested in the exact same asset types, as cyclical economic shifts impact different asset types in varying degrees.

THE BEST INVESTMENT IS CLOSE TO HOME …

For investors, 2016 has arrived with a bang or, as some may argue, a dull thud that has been felt around the world. Since the New Year’s eve celebrations were wound down and hopes for a better year in 2016 were dialled up, The Dow Jones has fallen 7%, the S+P 500 8%, and the NASDAQ a nerve jangling 13%. Every other major financial market in the world reveals similar performances with Japan, China, London and Germany all showing significant declines during the same period. The Dubai Financial Market has recovered in recent weeks but is still 4% in arrears when compared to the start of the year.

So, what should an investor do? …  How does todays investor make some progress towards increasing his or her wealth in 2016?

Investing in Dubai Real Estate remains a realistic and lucrative alternative which has significant potential to satisfy the appetite for investment returns. The fundamental reasoning is compelling.

From a macro level, Dubai needs people to support an economy that is expected to grow at an estimated 2.5%+ in 2016 but increasing exponentially as the end of the decade draws near. The reason for this growth trajectory is the commitment and determination to deliver on initiatives such as the 2020 World Expo and much of the city’s planning comprehends the number of people living in the emirate to grow to 3.4million people by 2020, a 7% annual increase from today’s population of 2.25million.

Dubai has managed to develop a level of diversification that will allow it to weather the current global oversupply of oil. With oil representing only about 4% of Dubai’s GDP, the effect of the decline in oil prices is not as drastic as some may think. While a reduction in public spending is to be expected, Dubai’s economy is being driven by fundamentals such as tourism and trade and the focus of spending will be on new projects to grow these important revenue generating economic segments and further diversification.  Dubai’s attracted over 14 million visitors in 2015, continuing a growth trend of approximately 10% per annum since 2010 and is well on track to attracting over 20 million visitors in 2020.

And the 277,000 extra jobs that are generated to ensure the estimated 20 million visitors to the Expo see Dubai in its most favourable light is a significant statistic. 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.

Interest rates in the US will continue to rise and the AED will continue to get stronger. To invest in a market that nearing the end of a 20% correction and in a currency that certain to appreciate over the coming 3 to 4 years can only make sense, especially when finance is still relatively affordableand when considering the availability of off-plan purchases with highly lucrative payment plans.

And the market itself is becoming more efficient. Developers have learnt from the past and are continually revising projects still in the feasibility stages after carefully analysing future demand. This prudence in managing supply will help preserve values and confidence in how the market is operating going forward and is yet another indication of the markets rapid progress towards full maturity.

The structural shift towards more affordable housing in 2015 will serve as an important factor in the development of the Dubai economy overall. Every emerging economy needs to develop a strong middle class as its expansion is critical to growing a sustainable economy and developing resilience in the face of external financial and economic shocks. In addition, for Dubai to compete effectively on a regional and global basis, the cost of doing business in the emirate must be competitive when entrepreneurs or corporations are considering alternatives for their operations.

For a superior investment yield and strong return on your investment, the total returns that Dubai Real Estate provides will be hard to beat over the next 5 years.  Properties in the burgeoning affordable segment continue to provide Gross Rental returns of 8% with 10% rental yields not uncommon and, because of the recent price correction in the market and the slew of financial incentives that have been introduced, accessing the yields and returns can be done with comparatively minimal capital outlay. And the good news is, and both rental yields and property values are expected to increase as the 2020 World Expo draws nearer so capital appreciation is expected to average 7% per annum between now and 2020

But returns are only one side of the equation… what about the risk?  The ongoing development of the industry’s regulatory framework and implementation of laws and regulations to safeguard both consumer and investor interests, the overall industry and the economy at large from rampant and irresponsible speculative, predatory or unethical practices, reveals a mature and balanced approach to shaping an industry which exhibits sustainable growth over the long term. The industry is much more resilient in 2016 and investors have benefitted enormously from the developments in this area.

There is no doubt that the past year has been challenging for equity investors, frustrating for fixed income investors and costly for investors who saw the valuations of their mutual funds, many leveraged with cheap finance, lose 20% to 30% of their value.

An investment in Dubai’s Real Estate cannot be ignored as an alternative, whether as a primary source of returns or as a contributing participant of a broader investment portfolio, to successfully generating wealth.

Time to hold on, or let go?

By Mohanad Alwadiya

The year 2016 has certainly made its entrance with a bang.

By mid-January, the Royal Bank of Scotland’s dire warning to “sell everything except high quality bonds” had everyone’s tongues wagging, with some analysts saying that yes, 2016 could lead the US and European markets down a substantial plunge. On the other hand, a few critics of RBS’s dismal pronouncement have advised investors to stay calm but keep a close watch on events as they unfold.

Reflecting the property market slowdown which became more marked in 2015, some distress sales had already begun creeping into the market which left me a little intrigued. It reminded me of a meeting I had with one of our most loyal clients.

As the owner of a portfolio of apartments purchased in early 2011, the past few years had been an extremely lucrative time for this client, and his success has been a result of his astuteness, objectivity, and well-developed analytical and decision-making skills refined by years of experience in an exciting albeit sometimes-risky market.

The topic of our conversation was whether or not to sell his property assets as the market has certainly slowed. I was surprised by the question as he had always held the view that owning property was an important part of his overall investment portfolio, and the assets he is holding are of excellent quality located in some of Dubai’s well-established or iconic areas. Rather than make a hasty decision that might be regrettable, I conducted a thorough review and constructed a recommendation for his consideration and eventual decision.

When reviewing the portfolio, it became apparent to me that now, more than ever, property portfolios require very careful management. While on the face of it, an easy decision would be to sell our client’s entire portfolio – not for a substantial profit, but simply for a “return of investment,” to quote RBS. But the question remained, if he were to sell part of his property portfolio, where should the money be invested? There was no answer as there was no plan.

As part of our analysis, we found that by retaining his portfolio, our client would continue to receive an average of 6.8 percent net rental returns per annum on the adjusted value of his properties over the next 5 years. In addition, notwithstanding the recent cooling of the market, we estimated that he could expect, on average, a capital growth of at least 6 percent per annum over the next five years for an estimated net total return of 12 percent per annum, a return we considered conservative.

The review included careful analysis of current maintenance requirements, future capital works, market factors, regulatory developments, industry forecasts and trends, alternative opportunities, risk factors, and the likelihood of relevant future events, whether they be economic, political, regulatory or financial in nature.

When I asked our client what alternative investment could provide the same return without taking on greater or excessive levels of risk or incurring new investment transaction costs, none could be identified.

The example of our loyal client clearly illustrates that now, more than ever, property portfolios require very careful management. We all know the market has cooled, but this is hardly a reason to make rash decisions without looking forward and doing some proper analysis.

Wherever you look around the globe, yield and total returns are getting harder to find, and the value of established property portfolios with good occupancy levels and good projected tenant retention are increasing in comparative value all the time.

Those investors who hold and nurture their existing property asset portfolios will do very well over the next 5 years, particularly those who have diversified their holdings to include some of the more affordable asset types as well. Conversely, rather than selling existing assets, the opportunity to use existing equity to take advantage of the current market slowdown and finance new acquisitions and expand portfolios is one strategy that we are working on with several clients now.

Not everybody has the time or is comfortable with managing a property portfolio, especially in times of change. 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.

Think of your investment as your business, a business that will be affected by many different factors and events. Proper management is essential, and you need to ensure your business is in capable hands – providing you with the returns you expect with as little hassle as possible.

And even as other prominent financial institutions like Standard Chartered and JP Morgan have expressed somewhat similar sentiments in terms of oil prices and stocks respectively, those investors with sufficient liquidity, and who already enjoy ownership of a varied stock of high quality performing real estate assets may want to consider acquiring more property after proper due diligence.

All knowledgeable investors know that, when all else fails, real estate is one type of asset that increases in value over time (capital appreciation)… even after being subjected to market highs and lows.

In sum, if you have what it takes to hold on to a good quality real estate portfolio, do not even consider selling at this stage. If market prices give you good reason to acquire more, why not? Remember the market cycle – right now, if you can still afford to purchase property, go right ahead and buy – but, as always, with eyes wide open.

2015 a year to remember!

The year 2015 will be remembered as the most important periods in Dubai’s real estate history. It demonstrated to the world that the real estate industry in the emirate has achieved a level of maturity that enabled it to successfully manage the significant challenges associated with being the hottest real estate market in the world without succumbing to what would have been an inevitable and resounding crash.

But crash it didn’t. The market in 2015 saw a slowdown which was managed and welcomed by all those who wished to see a market which enjoys healthy and sustainable growth rates.

So, what will 2015 be remembered for?

Well, the headlines that made continual references to the fact that there was a Real Estate correction will not be forgotten. Those who possess a more tactical, less strategic and shorter term point of view will view the year through a negative yet narrow lens while those who are taking the long term perspective, will view the year as one that saw the elimination of many systemic issues, addressing fundamental market imbalances and the implementation of necessary adjustments to deal with impacts of external issues on the efficient operation of the real estate market itself.

2015 will be remembered as the year that the mortgage rules implemented by the Central Bank and the increase in registration fees by the DLD really had full effect in helping to cool the market. It will also be remembered as the year that developers went to the “ideas bin” to create a myriad of different easy payment plans that, not only offered potential customers with an immediate and easier way to pay for off-plan properties, but also assisted in establishing new values for finished properties as well.

2015 saw a slew of new projects being launched, each one adding to the rapidly increasing on liquidity levels and, eventually, prices market-wide. Each additional launch added to the competition for the investor dirham intensified leading to a gradual reduction in prices for off plan units making the risk reward equation more palatable for off-plan units versus completed units.  In addition, the shift of developer focus in response to the call for more affordable housing also meant that investors gravitated towards this, perhaps the most important structural correction in the market to date.

Which means that 2015 will also be remembered as the year when the market got serious about building affordable properties, mainly because of the rapid growth in Real Estate prices in preceding years, a dirham that was rapidly appreciating versus most major currencies due to geo-political issues in Russia, tanking of commodity (including oil of course) prices, unprecedented quantitative easing in Europe, surprise downward revaluations of the Chinese Yen along with the imposition of capital controls and the imminent and the most talked about interest rate rise in US history. With global growth slowing and the strength economic recovery being questioned everywhere except for the US, Dubai faced the reality of simply being too expensive for its residents and too costly for its businesses. The cost of acquiring, owning and managing Real Estate plays a large role in determining the fiscal viability of both individuals and businesses in the emirate.

But 2015 will also be remembered as the year that was critical to the growth expected to be experienced in 2016. The price correction that was so much a part of 2015 in Dubai will bottom out in the early part of the year before the market starts to recalibrate. Population growth will drive demand going forward as, put simply, Dubai needs people to support an economy that is expected to grow at an estimated 4-5% annually for the remainder of the decade and to deliver initiatives such as the 2020 World Expo. The Expo alone is expected to generate an additional 270,000 jobs and drive demand for housing and commercial facilities that, by and large, don’t currently exist. Much of the city’s planning comprehends the number of people living in the emirate to grow to 3.4million people by 2020, a 7% annual increase from today’s population of 2.25million.

There is no doubt that the market gyrations of 2015 will result in more stable real estate market will provide a much better launch pad for what will be a period of significant economic and commercial activity over the next 5 to 7 years. The structural shift towards more affordable housing will not only serve to accommodate the expected rapid population growth associated with the 2020 expo, but also serve as an important factor in the development of the Dubai economy overall. Every emerging economy needs to develop a strong middle class as its expansion is critical to growing a sustainable economy and developing resilience in the face of external financial and economic shocks. In addition, for Dubai to compete effectively on a regional and global basis, it needs to ensure that the cost of doing business in the emirate does not position it as an outlier when entrepreneurs or corporations are considering alternatives for their operations.

When taking this perspective, 2015 will be seen as being at the forefront of the next period of growth for Dubai and will not be recalled as a year of stagnation, but rather as a year of laying the foundations for what may well be the most prosperous decade in the emirates history to date.

Beyond promises, Dubai brings trangible benefits

The emirate has a lot going for it that make it attractive to investors from India and other countries

I was reading with interest an online article recently that underlined the top reasons why Dubai’s property was so popular with Indian nationals. The reasons offered are not really surprising and essentially summarize why investing in property in the emirate has had significant appeal for not just Indian investors, but those from every corner of the world.

Dubai is easy

Compared to many countries in the world, investing in Dubai’s real estate sector is relatively easy. Enlist a reputable brokerage, select your desired property, negotiate a price, write the necessary cheques and the property will be yours. Bureaucracy, which makes investing in other countries a pain, is virtually nonexistent and, as long as you follow procedural requirements, your property transaction will be processed efficiently and without undue delay.

Dubai provides superior value for money

When compared to the major Indian cities or big cities around the world, Dubai offers increasingly better value. A modern infrastructure that is continually being developed, a renewed focus on affordable housing, world-leading rental yields and finance rates that have been at historic lows for some time now, the value that is inherent in Dubai property is hard to beat in India or any other country in the world.

Dubai provides superior, tax-free rental yields

put simply, there are not many real estate markets in the world where an investor can enjoy an average 7 percent yield Without paying any local taxes. So, net of service charges, maintenance costs and property management fees, the rent that you charge your tenants goes straight into your wallet without the taxman taking his share. And with the cost of finance remaining at near historic lows, the interest on any borrowings you may have is easily covered by the rent that is being yielded by your property, leaving more free cash flow to pay down your principal.

Dubai doesn’t impose a capital gains tax

In addition, capital gains are not taxed upon disposal of the asset, which makes investing in Dubai property a very lucrative addition to any investment portfolio – when taken with a long-term view, a Dubai property investment will provide handsome returns. So from a total return point of view, there are few real estate investments that are better than Dubai.

World-best infrastructure and security

Many times, investments that provide such lucrative returns are normally associated vvith excessive risks or poor infrastructure. This is not the case in Dubai. Dubai’s focus has been on developing a World-leading infrastructure for the benefit of commerce, trade, tourism and habitation. The remarkable improvement that has been made in opening Dubai up for business, implementing the physical, digital and logistical infrastructures, legal framework and economic policies in the post—recession period

has been impressive. There is no doubt that Dubai’s future is looking very bright and investors globally continue to monitor its progress very closely.

Dubai’s brand value has never been stronger

There is no doubt that Dubai has captured the imagination of the world and there is no better barometer of this than its burgeoning tourism industry. Investments in revenue-generating sectors such as entertainment and hospitality have ensured that Dubai is increasingly being included on travellers’ bucket lists all over the world.

Dubai excels at economic entrepreneurialism

Dubai is excelling in an area I call economic entrepreneurialism. Already known for conducting world renowned exhibitions, there is no greater example than the upcoming World Expo, which Dubai will be hosting in 2020. Dubai is committed to making it the best ever.

Dubai is close to India and many countries

There is no doubt that Dubai is well placed geographically. With one-third of the world’s population within a four-hour flight and two-thirds within an eight-hour flight, existing emerging, economies such as Russia, India and China, and soon-to-be emerging economies on the African and South Asian continents will soon all share Dubai as a central hub. No wonder investors are so excited about the emirates prospects.

A multicultural and cosmopolitan society

Long a haven for expats that fulfilled employment contracts of limited duration, more and more people have decided to settle down and call Dubai home. This change in outlook has had a dramatic effect on the stability of the property market and the development of a society that, while incredibly diverse, is also less transient and more committed to developing the emirate as a long-term lifestyle solution. As a result, while there has always been a vibrant and strong Indian community; communities representing other nationalities are developing rapidly making it easier for new expats to make a decision to make Dubai their new home. History has proven that strong nations were built upon such diversity.

TIME TO REVISIT THE PRACTICABILITY OF REITS

Mohanad Alwadiya, MD of Harbor Real Estate & Instructor at the Dubai Real Estate institute, the official training 81 cortication arm of the Dubai Land Department

The UAE property market slowdown aside, it is great to know that the country’s real estate landscape has gone a long way from its humble beginnings. Aside from the landmark development in 2002, when UAE property (specifically in Dubai) was initially offered to be sold on freehold basis to expatriates by the Dubai government, another important milestone and sign of industry maturity, though relatively untapped, was the introduction of real estate investment trusts (REITs) into the country, with the first REIT entity, Arabian Real Estate Investment Trust (Areit) established in 2006.

And as people continue to agonize over the current market state of affairs, l would advise ambitious though financially limited would-be investors to look into the viability of investing in REITs rather than sitting and waiting for chance to buy property they can actually afford. But what differentiates a REIT-owned property from traditional property out for sale in the market? Before moving any further, let us try to understand what REITs are first and foremost, beyond the words that make up the acronym itself a REIT is a trust company which accumulates a pool of money through an initial public offering (/PO) and buys, develops, manages and sells real estate assets. REIT5 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. Investors have the opportunity to buy a unit in a REIT which is actually a portion of a managed pool of real estate; this pool of real estate then generates income through the renting, leasing, selling and financing of property and distributes it directly to the REIT investor on a regular basis. Investors in REITs can expect returns without having to deal with the headaches of maintaining, managing and marketing their real estate assets. Units held in a REIT can be bought and sold like a stock on a stock exchange so investors also have the option to make a safe exit from the property marketplace whenever they decide to do so. There are three types of REITs: equity REITs, mortgage REITs, and hybrid REITs. 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 the investment and ownership of property mortgages while hybrid REITs combine the investment strategies of equity REITs

And mortgage REITs by investing in both properties and mortgages. A REIT can provide portfolio diversification because of the large amounts of pooled funds available to the REIT management team which, in turn, enables the accumulation and operation of different types of property assets in different locales. This provides the REIT management greater flexibility to minimize the effects of any cyclical downturn by enabling them to focus on opportunities that always exist and emerge from any correctional period to provide a superior return. If you are a landlord or building owner,

the advantages of getting into business with a REIT are manifold; because, in effect, property owners become “shareholders” in a single real estate company, landlords can reasonably expect a safer, more secure and regular source of income in the form of rent through an easy, fuss-less, flexible, liquid and maintenance-free investment. For tenants, REIT—owned buildings, whether they are malls, business parks or towers, are usually well maintained and professionally managed, so being part of or being under a REIT establishment is a win-win for both landlords and building tenants.