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Q1) There are many opportunities invest in off-plan properties, but the values in the secondary market have improved signiﬁcantly. Are there still advantages of buying off-plan?

Purchasing a property off-plan can provide you with superior capital gains by the time of completion, providing you are buying at a discount to today’s finished inventory and the market strengthens up to the completion date for the particular property that you are considering. This will depend on an estimation of economic growth, population expansion, the number of competing projects in the pipeline and eventual industry inventory position. Be smart about the “product” that you buy and try to avail yourself of a payment plan. Look for certain property types complete with amenities and facilities in locations you believe will be sought in the future. Deal only with reputable developers and check the status of the escrow account.

Q2) I am planning to invest in Dubai real estate.As this would be my ﬁrst property investment, can you give any useful tips?

First of all, know why you want to invest in property. You must have a clear understanding of what you are trying to achieve and what role your property portfolio will play in building your wealth. Then you must set your financial objectives carefully. Success in property investment can only be attained when (and if) those objectives have been realised. Always think long term for your greatest success. Those who have had the greatest success possess the ability to think long term, make rational, well-researched and carefully thought-out decisions with the end objectives in mind and understand that every real estate industry globally will go through cycles of growth and contraction. Make sure you know your-stuff by being able to communicate intelligently and knowledgeably with the experts. Always strive to eliminate risks. Plan your finances, cash flows, capital requirements and debt levels carefully.

Q3) I wish to sell my villa, but the garden needs a little bit of work. Is it worth investing in improving the garden? Am I likely to get my money back?

For your garden to become a selling point, you need to establish a low-maintenance, functional landscape that is highly appealing to the potential buyer. Resist the temptation to clutter the landscape with every species of flora known to man. Plants grow and you need to keep that growth in check as your garden can look unkempt and create a negative impression. Ensure that all landscaping elements must be coordinated carefully. if you don‘t know or understand the differing qualities of certain soils, it’s time to call your landscape gardener and have him produce an impressive garden for you. Even if you don’t plan on selling your home for another five or 10 years, now is a good time to lay the foundation for a great landscape design that will win over your future homebuyers.

Q4) While the correction in the Dubai property market is broad, certain segments have undergone a greater correction than others. Are there greater-opportunities in some segments in terms of long-term ROI?

Definitely! We are encouraging everyone to invest in the lower priced, higher value, affordable segment of the market as there are some great opportunities. There are many high-performing, yet affordable developments spread all across Dubai, giving investors a wide range of options to choose from. Apartments in some developments have seen excellent capital growth with some residences growing by 35%-over the past two years, with rental premiums of at least 7% not uncommon. Demand for this type of affordable accommodation continues to grow especially as Dubai’s population swells in the run-up to the Expo. invest in an apartment and retain ownership for at least five years as you will benefit from superior capital growth and enjoy a healthy net annual rental return.

Question of the week

Q5) Recent reports have suggested that the current property correction in dubai has bottomed. Would you agree with this and is it a good time to buy?

It is always difficult to pick peaks and troughs in real estate cycles.
Having said that, there are definitely opportunities available and advantages to be gained from purchasing now as the next few years are expected to see strong economic growth. Start your property search immediately as a property investment requires the same approach regardless of the state of the market. lf you have the cash, pay for it outright, but do consider taking out a mortgage as long as you understand the impact of interest rate rises in the future. Think carefully about location, surrounding infrastructure, construction quality, and developer reputation and building amenities. Properties with attractive views, close to the beach, with golfing facilities, are part of an iconic development and have close access to the Metro generally provide good returns. You also need to consider the effectivity of the owners association, the service charges and the quality of maintenance services as these will affect the long-term value of your investment. Be purposeful, patient and pragmatic and you are well on the way to making a very good investment decision.

Mohanad Alwadiya
Managing director of harbor real estate and part-time instructor at the Dubai Real Estate Institute.

Q1. Will the prices of 2008 ever come back, and if so, when?

A1. Dubai real estate face values fell, on average, by 50% during the recent global recession. In some area, it was closer to 33%, and in others, closer to 65%, depending on the location an proerpty type.
For smiplicity’s sake, however, let’s assume that 50% is the representative value.
An investment needs to grow at approximately 7% per annum, compounded for 10 years to double in face value. Assuming your property consistently appreciates at 7% per annum, you would need to wait approximately 10 years for the face value of your real estate asset to double.
Many factors will contribute to this growth, including the pace of global economic recovery, regional economic and geopolitical factors, and of course, Dubai’s own growth strategies.
Don’t forget that one of the advantages of investing in real estate is that it can provide you a regular income and capital growth. Some properties in dubai today are returning between 7% and 9% net to the owner. This type of return is hard to match anywhere else.

Q2. I’m looking to rent a house, but I found that it has district cooling. Is this something good or bad?

A2. District cooling for the provision of chilled water has emerged globally as a way to provide cooling in a more environmentally sensitive way. Aside from the obvious benefit of having chilled water. Especially in the summertime, it helps in saving on the costs of electricity which will be reflected in lower DEWA bills for tenants.
However, the DEWA savings will be somewhat offset, as the overall utility chares of units that are equipped with chilled water district cooling will be slightly higher, since they include expenditures for fixed operating costs via the application for the appropriate consumption charges.
Most units which are serviced by chilled water district cooling are still offered at lower rental rates. If you look at newly-completed projects such as Skycourt, Rita and Moto Ciry, which provide this form of service, the affordability o units in these properties is enhanced by a number of elements, including more energy efficient cooling.

Q3. I would like to invest in a Two-bedroom apartment in Burj khalifa, but I’m not sure if that is a sound decision or not. What’s your advice?

A3. I am assuming that you are not referring to an apartment at the Armani Residence, and you are taking a long-term view of your investment.
The rate of return will depend on a number of factors, including the initial purchase price, cash inflow from the rent, cash outflow from the charges associated with maintaining the property and your projected capital growth.
Two-bedrooms (with maid’s room) in the Burj Khalifa are being advertised for around Hd3,000 per sq.ft., depending on the floor and view. Therefore, you will be looking at an outlay of approximately Dh 6 million for a reasonable-sized apartment. Service charges will be around Dh33 per sq.ft., so you will need to cash out around Dh66,000 annually.
Assuming you wish to achieve a minimum of 5% net rental return, you would need to charge around Dh366,000 per annum or Dh30,500 per month. Values in Burj Khalifa have virtually bottomed out and there have been positive signs of capital appreciation over the last 12 months. Barring a collapse in the credit markets and the recurrence of a global recession, you could reasonably expect an average capital growth of around 7% over the next 10 years.
This is particulat investment can be very lucrative. You will be investing in an architectural icon which will always give some measure of security because of its apparitional qualities, that even after taking a long-term view, the risks would appear to be of secondary importance to its value.