economic

Ask The Agent

Mohanad Alwadiya CEO, Harbor Real Estate

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

It depends on an accurate estimation of construction timelines which are invariably fluid, and the demand for real estate assets due to Dubai’s growing population that is largely driven by overall economic growth going forward. In addition, it needs to comprehend a lag effect from the time the conditions conducive to development are identified by developers and when properties are finally released to the market. Given that the economy of the emirate is expected to grow at an estimated 5+ percent annually for the remainder of the decade, and initiatives such as the Expo 2020 are expected to generate an additional 270,000 jobs, the demand for housing and commercial facilities is expected to grow significantly. Much of the city’s planning comprehends the number of people living in the emirate to grow to 3.4 million by 2020, a 7 percent annual increase from today’s 2.25 million.

What property characteristics should I, as a buyer, pay close attention to in order to minimise any risks associated with my investment decision?

Location is the first factor to consider as it can drive up a property’s value. Prestigious locations like Palm Jumeirah, Downtown Dubai and Dubai Marina fared well in the post-GFC period, and affordable areas such as Jumeirah Lakes Towers, The Greens, Dubai Sports City, Discovery Gardens and International City followed suit. But there are other factors as well. The quality of the end-product and infrastructure, maintenance services, and the extent of completion must also be part of any consideration. Value for money and superior ROl must be considered if you are an investment buyer. Current and future supply levels of various asset types need to be examined. However, it is the fundamental drivers of market values which remain: location, product quality, features and benefits, and demand and supply.

We’re a startup company looking for an office space with the best value. Should we rent or buy?

At this stage, you need to keep costs down until you become fully established in the market. The old cliché “location, location, location” is all about the convenience and prestige it can bring to any business. Great value, affordable and well-constructed office spaces may be found in a particular area, but these may not work for you if the location is a hindrance to your operations. We always advocate businesses acquiring their own premises if they commit to operating long term in Dubai. There is no tax advantage in leasing in the UAE, and as long as your office space is appreciating, your balance sheet will grow stronger over time. If you decide to lease your premises, look for the best deal and lock it in for at least three to five years. Lease rates will soon increase going forward, so make sure you take advantage of current rates.

We purchased a villa in Dubai in 2010. Instead of continuing to rent it out, my husband and I decided to sell it. How do we find a good seller’s agent?

There is a large number of licenced real estate brokers in Dubai and the UAE. Finding the right agent to sell your property is something you need to pay close attention to because getting the best person is crucial to how quickly you can make a sale without compromising on your agreed-upon expectations. Factors such as years of experience in the UAE market, track record of success, in-depth understanding of market trends, area expertise, client testimonials, level of commitment, passion, dedication, professionalism and honesty are important. He/ she should also be a duly licenced RERA-certified real estate broker. Before committing to any realtor, make a list of all the questions you want answered first and see how they respond as doing so will help you gauge whether or not giving him/her your business is the best thing for you and your husband, and your property.

Question of the Week

What sort of documents are required after accepting an offer to buy my property?

The first (and most important) step is to prepare and sign an MOU which contains all the details and timing particulars of the offer. The buyer has to sign the MOU after reviewing its provisions. As with all legal documents, get a proficient broker or legal representative to draft the MOU for you. You also need to sign “Form F,” a contract between the buyer and seller. Ensure that the buyer and/or the relevant representative has their respective identification and/or authorisations so payments have been satisfactorily arranged. Step 2 will require the receipt of a “No Objection Certificate” from the developer. Step 3 is to pay the final utility bills so that the account is cleared and ready to be taken over by the new owner. If there’s a tenant, you will need to sort out any outstanding rent or payment details. Step 4 will require you to go to the Dubai Land Department offices or a trustee registration office together with the buyer and all relevant parties, and conduct the final transfer. Transfer of ownership will take place at the DLD with all monies owed by the buyer to you to be presented as part of the transfer procedure. Although the above procedure appears simple enough, I recommend you engage a professional to handle the transaction process for you. You will be surprised how little issues, many not foreseeable to the inexperienced, can delay the satisfactory settlement of your property sale.

2017 … THE YEAR IS ALMOST HALF OVER

It was an interesting first quarter in Dubai’s property market. While prices generally approximated those of the last quarter of 2016, they actually fell by around 8% from the corresponding quarter a full year prior.

Nevertheless, and maybe not too surprisingly, total transaction value jumped by 45% for a total spend of around AED 77 billion on the back of a 7% increase in transactions. Needless to say, there were some pretty big deals done in the 1^st quarter.

The 1^st quarter industry performance shouldn’t come as a surprise to many. The market has been approaching its cyclical bottom for some time now and it appears that, barring unforeseen events, the decline in property values experienced last year has just about run its course.

So, what does the rest of the year hold? Well, I wouldn’t count on a rapid and sudden turnaround in property values. We are likely to do a bit of bottom-dwelling for a couple of quarters yet.

The headwinds that beset the property market may have lost some of their velocity, but they are still strong enough to make any sudden upturn in values very unlikely.

Nevertheless, the market is offering the best value for some time and will continue to do so for at least the next couple of quarters … but I wouldn’t wait too long.

Affordability has been key to keeping the market bubbling along, and a slew of affordable properties have been launched over the past 2 years and there will be more launched in 2017. First home buyers have never had it so good in Dubai and affordability, or a lack thereof, as a reason to continue to rent is now more of an excuse to justify either procrastination or excessive conservatism.

The strengthening AED has been a headwind, no doubt, particularly where those investors purchasing with the pound, euro and yen are concerned. However, for those who have purchased recently or plan to do so imminently, the value of your property will be increasing as the US dollar continues to strengthen in 2017.

The US Federal reserve remains committed to normalizing interest rates in 2017 which is good news for investors who are holding assets denominated in or pegged to the value of the US dollar, while the angst associated with Brexit is only just beginning. Although interest rates will be increasing going forward, they will remain at very affordable levels for quite some time, making financing through mortgages still very attractive.

And the economic environment will improve from this time forward. Put simply, Dubai needs people to support an economy that is expected to grow at an estimated annual average of 5% 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.

Meanwhile, oil prices continue to bubble around the USD45 to USD50 per barrel mark. Despite this obvious crimp on revenues, the governments Infrastructural spending continues unabated with the total budget outlay of Dh48.7 billion for 2017 being marginally up from Dh48.55 billion allocated to 2016. Looking at the 5-year budget plan of Dh248 billion, the average annual spending of Dh49.6 billion is higher by 6.5 per cent than Dh46.6 billion spent during 2014 to 2016 inclusive. This is significant as it demonstrates an unwavering commitment to economic and societal development with the investments in development initiatives being supported by revenues to be generated a newly introduced VAT in January 2018.

And despite global nervousness and uncertainty emanating from Brexit, terrorist threats, North Korean recalcitrance and virtually everything under the Trump administration, the global traveler is continuing explore the globe. Dubai’s economy continues to be driven by fundamentals such as tourism and trade and a slew of new projects to grow these important revenue generating economic segments. Dubai welcomed almost 15 million overnight visitors in 2016 representing a 12% increase over 2015 to continue a trend of approximately 10% per annum since 2010. 2017 is expected to see the trend continue.

While it appears that the market may have been overburdened with a glut of new launches raising the prospect of an oversupply, 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.

I stated earlier in the year that 2017 will be remembered as a year of the astute investor. Those that can recognize the headwinds and understand that every headwind eventually dies out, will do very well over the coming 7 years by investing in 2017.

The race for the sky is not over in Dubai

By Mohanad Alwadiya
Published in Gulf News Freehold

It is the beauty, grandeur and special significance of landmarks and monuments that continue to withstand the ravages of time – characteristics which make them timeless in appeal, and transform them into global icons.

Not to be missed, of course, are the socio-cultural impact and economic benefits of having monuments and landmarks in a place, city or country. After all, their building or restoration already spurs economic activity and, with the end product, can lead to some form of socio-cultural revitalization.

Every nation or great city has some symbolic architectural icon which helps define either the history, vision, cultural values or characteristics of the people that inhabit it… whether it be the Statue of Liberty in New York, The Eiffel Tower in Paris, 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.

Dubai’s dynamic, ever-changing landscape, a constant in the continuously developing emirate, is a characteristic of the city known the world over. From the opulent halls of the Burj Al Arab and the graceful fronds of the Palm Jumeirah, to the tallest skyscraper that is Burj Khalifa, the architectural and engineering feats Dubai is famous for seem to have no limits. Areas which were once all desert and sand are now teeming with people, businesses, and bustling with tourists.

Such achievements in the field of architecture and engineering prove how important property development is to real estate, and to the general economy. Emaar Properties, one of the UAE’s most respected property developers, after delivering established communities such as Arabian Ranches, Emirates Living, and Dubai Marina, has played a significant 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 recent announcement of the construction of a stunning new architectural icon, their latest exciting development.

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 to global visitors hailing from all across the world. Once The Tower is finished and unveiled in time for Expo 2020, taking inspiration from the Eiffel Tower which was built for the 1889 Paris Expo, it is envisioned to become another global landmark surpassing the boundaries time and culture.

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.