investment

The Essential role of property asset managers

The role of the property asset manager is misunderstood by many, with the majority of property investors and other industry participants thinking that the role does not extend beyond the collection and remittance of rental receipts and acting as a buffer between the landlord and the tenant.

Little do they realize that a good property asset manager will generate a greater return from a property portfolio and enable long term portfolio strategic objectives to be realized.

Any investor in property would benefit from a professional property asset manager but it is essential to know what to look for in selecting a professional to manage their property(s)?

Astute investors understand that you need a professional who is experienced in the market. Not just any market, but the Dubai market. Typically, if you find somebody with at least 10 years’ experience, you will have found somebody who has survived the global recession, and that should provide a reasonable indication that they are in the business for the long term and that they had the skills to navigate and survive Dubai’s property slump. Many didn’t.
Strategic Approach. A competent property asset manager will provide a whole host of services for the investor but the most important is the development of a Property Portfolio Strategy. The professional must be able to articulate and present his thoughts after conducting a thorough assessment of your personal situation and property portfolio. He must be able to provide you with a credible strategy and activity plan which is designed to harness the true potential of your property and provide you with the maximum rate of total return. It is essential to have a well thought out strategy for your property portfolio if you are to maximize your returns.
Knowledge and Understanding. Not just anybody can formulate a credible and implementable strategy. It requires years of expertise and a fundamental understanding of what makes Real Estate such a worthwhile and superior investment. A true professional will have a strong knowledge base on topics including industry history, current market factors and trends, risk factors, and the likelihood of relevant future events that will affect the performance of your property investment. This knowledge should span global, regional and local landscapes and will require a good understanding of economic factors, industry knowledge extending to government policy and regulation, finance and market dynamics.
Planning Expertise and Ability to Implement. Forming a strategy is one thing, but being able to bring the strategy to life is quite another. A true professional will provide an activity plan which will include details of pricing and marketing, customer relationship management and tenant management and policy for the entire portfolio. Essentially, this area of expertise is related to the “topline” or revenue generation and management of the property. Equally important is the cost management and maintenance supervision of the property. Many times, I have seen excellent “topline” performance being eroded due to poor operational and maintenance cost controls.
Organizational Ability and Communication Skills. Managing your property portfolio will also require proper performance measurement, communications and review schedules, and status reporting and financial statements. Investors should always seek examples of these elements as transparency and candid performance appraisals are essential for managing your portfolio correctly by addressing shortfalls to objectives, issues requiring addressing and opportunities for performance improvement, in addition to your peace of mind.
Customer Centricity. It’s important to choose a property manager who you can work with and who, you believe, has your best interests at heart. Your property manager must be customer centered and, unfortunately, in this business, this is not always the case.
There is no point entering a business relationship that is lacking in mutual trust and respect. The investor must have confidence in his ability to manage a business … the investor’s business… which just so happens to be a property portfolio. As with all investments, but especially investments in property, there will be good times and challenging times. There is no such scenario as “set and forget”. It doesn’t exist. If you do not respect the manager you have appointed, the relationship will not survive the challenging times and you will need to go through the whole process of finding a replacement.
A History of success. The investor should be sure to ask for referrals and call some existing clients. It’s important to seek out success stories and ask to see examples of client reports to assess their completeness, continuity and timeliness. The investor must ask the property manager carefully thought out questions to gauge the depth and breadth of knowledge that he possesses.
Finally, it’s essential that the organization the investor is dealing with has the resources to support the manager of the portfolio. In these times of eliminating overheads, individual performance can be inhibited because of a lack of organizational support. The investor should ask to meet the team.

Choose Wisely The investor must ensure that the property asset portfolio is in good hands providing expected returns with as little hassle as possible. But the investor must realize that once a property manager is appointed, the ultimate return on the investment is largely in his hands.

5 Key Questions You Must Ask Yourself Before Investing!

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.

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.

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.

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.

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! ■

THINGS THAT SUCCESSFUL INVESTORS DON’T DO!

I have been lucky in my professional life to have met and worked with some very successful investors. While I have found each to be different in personality, style and even investment philosophy, there are some attitudes, traits and perspectives that are shared among the most successful investors I have had the privilege to have met.

Thinking back to many interesting discussions I have had with these people … some of whom are my most loyal and respected clients … there a several things that I have not seen from this group of achievers. This is what separates them from the rest.

Never sink into negativity!!

I have rarely heard my successful investors project a negative stance about anything in their professional life. This is not to say that they support every philosophy, concept or idea and they will also not accept an occurrence which is contrary to what they think should have happened.

But instead of expressing such a negative emotion as hate, they continue to think positively and seek positives from a situation or take a positive approach to remedying that which they do not agree with. As a result, the dialogue is always positive, creating an environment positivity, proactivity and energy directed towards progress.

Taking this approach also helps to create a pleasant, purposeful and fruitful environment in which to work and helps to maintain or even build esteem and confidence among those that can contribute to achieving exceptional results. It promotes objectivity, focus and decisiveness.

Never assume the world is fair!!

The world is not a fair place, never has been and never will be, and successful investors understand, embrace and accept that. This allows them to be immune from the negativity that can arise when an individual feels hard done by or cheated. It also allows them to plan, create contingencies and maintain a positive attitude when a seemingly unfair occurrence occurs resulting in a greater chance to respond to a situation rapidly and appropriately rather than dwelling on the fact that an occurrence was “unfair”.

Never accept that there is only one solution to any one problem!!

An open mind is essential to development, progress and eventual success. Successful investors will embrace new ideas and innovation. To not realise that progress is created from ingredients consisting of past experience and innovation is too rely too heavily on tried and true practices that gradually lose relevance over time. This form of decay has destroyed entrepreneurs, global corporations and even whole economies and societies. With globalization, the world has become a much smaller place. To not embrace, improve and implement world’s best practice and only holding close what you are comfortable is the biggest threat to creating continued success.

Never believe that you are solely responsible for your own success!!

Nobody has ever made it on their own. It was once thought that the iconic, independent, totally self-sufficient, unchallengeable, silent-type, hard-nosed entrepreneur who left metaphorical bodies in his wake as he doggedly climbed the mountain of success was the role model that should be emulated by all who craved achievement. Many have tried and they all failed.

No-one can achieve success on their own. As a matter of fact, the most successful people I have met have surrounded themselves with successful people and ensured that those people shared in their success. They seek opinions, listen carefully, discuss intelligently, consider alternatives and have their decisions reviewed. They reward those who contribute to their achievements and help them succeed as well for this is also a valuable way to learn and build momentum at the same time.

Never abandon the realm of possibility!!

Successful people know that nothing is impossible and hold the belief that every problem has a solution, some of which just haven’t been thought of yet. Anything is possible as long as there is willingness to explore, question and challenge and imagination is intensely applied and ingenuity is rewarded. Achievers do not complain about obstacles. They embrace them so as to gain an understanding as to how they can be overcome for they truly believe that nothing is insurmountable.

Negative words like “can’t,” “won’t,” and “impossible” are never heard from the mouths of unsuccessful individuals. They know complaining will not help them, but actually doing something about the issue at hand will.

Never look back!!

Could have… would have … should have. We have all heard these expressions of retrospective folly. Experts in hindsight have no place at the table of successful people and regret is a fruitless and pointless emotion. Successful people thrive on opportunities not lost opportunities. If they cannot make one opportunity work to their satisfaction, they move on and find another opportunity. Regret simply slows down the effective pursuit of the next great opportunity.

Never accept the unpalatable as inevitable!!

Victims have no choice. Successful investors create alternative solutions to every problem and will carefully consider all of them. In this way, successful investors are never victims for they create an environment filled with choices. Then it’s just a matter of deciding which choice represents the best way forward.

Successful investors know how to create opportunities where normal people think none seemingly exist. Successful investors believe that opportunities always will exist, but they are hidden in the recesses of our individual and collective imaginations. The reason why there are successful, is largely due to their determination and ability to extract those opportunities, while others are stagnating in the belief that they don’t exist!!

جريدة الخليج: 53 % حصة البيع على الخريطة في دبي خلال ثلاثة أشهر

سجل السوق العقاري المحلي في دبي بيع نحو 6350 وحدة سكنية خلال الربع الثالث من العام الجاري 2018، واستحوذت المبيعات على الخريطة على أكثر من النصف بواقع 53% (3366 وحدة)، وتصدرت كل من «الخليج التجاري» و«مدينة محمد بن راشد» و«دائرة قرية الجميرا» مبيعات الشقق على الخريطة خلال هذه الفترة.
وتصدرت «المدينة العالمية» و«مارينا دبي» و«دائرة قرية الجميرا» مبيعات الشقق الجاهزة بنسبة 32 % من مجموع مبيعات الشقق الجاهزة خلال الربع الثالث لعام 2018
أما مبيعات الفلل والمنازل الفردية الجاهزة فقد تجاوزت المبيعات على الخريطة في الربع الثالث من عام 2018 والتي تصدرتها «روعة الإمارات» (اميريتس ليفينج (و«المرابع العربية» و«داماك هيلز» والتي بلغت مجتمعة نسبة 30% من مجموع مبيعات الفلل والمنازل الفردية الجاهزة خلال الربع الثالث

استقرار سعري

ولفت التقرير المشترك بين «هاربور العقارية» و«بروبرتي مونيتور» إلى أن الأسعار التي تم تداولها للفلل والمنازل الفردية قد استقرت خلال الربع الثالث من عام 2018 على أقل من متوسط أسعار عام 2017، وضاقت فجوة السعر بين الشقق والمنازل المستقلة. كما اتجهت أسعار الشقق أيضًا إلى الانخفاض وبلغت في المتوسط نحو 1.2 مليون درهم في الربع الثالث من عام 2018. كما أن تداولات العقارات الجاهزة التي بدأت في منافسة أنشطة البيع على الخريطة للفلل والمنازل الفردية منذ نوفمبر/‏تشرين الثاني 2017، قد استمرت في اتخاذ نفس المنحى خلال هذا الربع

في غضون ذلك، وخلال الأشهر التسعة الأولى من عام 2018 استمرت تداولات البيع على الخريطة للشقق في التصدر حيث ركز المطورون اهتمامهم على تزويد خيارات منخفضة الأسعار وخطط الدفع الميسرة والمنافسة

والمنافسة والتنازل عن رسوم التسجيل وغيرها من الحوافز الأخرى

الرئيسي والثانوي

وطبقًا للبيانات الصادرة عن «بروبرتي مونيتور» فإن 27% من سعر تداولات البيع على الخريطة للشقق خلال الأشهر التسعة الأولى من عام 2018 تراوح بين 1,200 إلى 1,500 درهم للقدم المربعة. وبالمقارنة فإن أعلى سعر في السوق الثانوي للشقق بلغ بين 500 و 800 درهم للقدم المربعة
واستمرت شقق الاستوديو والوحدات ذات غرفة النوم الواحدة في تصدر المشهد الأنشط من حيث التداولات في كل من المبيعات على الخريطة والسوق الثانوي في عام 2018 حتى تاريخه
في الربع الثالث من عام 2018 سجلت أسعار المبيعات في سوق العقارات انخفاضًا ربع سنوي بنسبة 1.4% و 1.3% للفلل والمنازل الفردية والشقق على التوالي. ومن المحتمل أن النشاط الاقتصادي الضعيف وتسليم الوحدات السكنية الجديدة من المطورين لاحقًا هذا العام، أن يفرض مزيدًا من الضغط لخفض أسعار مبيعات المساكن. وفي تلك الأثناء، فإن إعلان حكومة دولة الإمارات في عام 2018 عن لوائح التأشيرة الجديدة لمدة عشر سنوات وتأشيرة الإقامة لمدة خمس سنوات للأجانب المتقاعدين سيكون له تأثير إيجابي على السوق في الأجل القريب

أداء الإيجار

كان انخفاض أسعار إيجارات الوحدات السكنية أكثر وضوحًا في «دبي لاند» و«الروضة – ذا جرينز» وفي «روعة الإمارات» و«موتور سيتي» و«المرابع العربية» و«فيكتوري هايتس» و كان متوسط التغير على مدى 12 شهرًا نحو7%
ومن المتوقع أن يستمر انخفاض الأسعار خلال الربع الأخير من العام الجاري وبداية عام 2019 مع وجود خطط لتسليم مساكن جديدة بكل من الملكية الحرة ومجتمعات الإيجار غير المنتهي بالتمليك في دبي
ومع ذلك، فإن أثر ذلك على بعض المشاريع سيكون أقل وضوحًا إذا استفاد المطورون من محفزات الطلب الفريدة مثل الواجهة البحرية والتشطيبات عالية الجودة والمرافق المجتمعية المتميزة

المعروض القادم

جرى تسليم نحو 6,000 وحدة سكنية في أنحاء دبي في الربع الثالث من عام 2018، وتركزت غالبية عمليات التسليم خلال الربع الثالث لعام 2018 في «دائرة قرية جميرا» و«منطقة برج خليفة» و«تاون سكوير» و«دبي الجنوب». واستحوذت الشقق السكنية على أكثر من 72% الوحدات التي تم تسليمها. أما بالنسبة لباقي السنة، فستتركز غالبية المعروض القادم في مناطق «الخليج التجاري» و«دائرة قرية جميرا» و«مدينة دبي الرياضية» و«واحة دبي للسيليكون» و«تاون سكوير»

مهند الوادية: 1.2 و 1.9 مليون درهم متوسط السعر

قال مهند الوادية، الرئيس التنفيذي لشركة «هاربور العقارية»: «من بين الملاحظات التي برزت في التقرير هذا عن السوق العقاري في دبي للربع الثالث من 2018، هو أن متوسط الأسعار الحالية للمنازل المستقلة والشقق يبلغ 1.9 مليون درهم و1.2 مليون درهم على التوالي، وهي تقريبا نفس أسعار ما رأيناه في الربع الأول من عام 2008 وقبل انهيار السوق المالي العالمي
وأضاف الوادية أن الفرق قبل عشر سنوات أن كنا في طفرة نمو اقتصادية سريعة متسارعة، حيث كان المشترون يلاحقون المكاسب المالية السريعة في ذلك الوقت، لم يتوقع الكثيرون أن السوق كان متجهاًً نحو الانخفاض الحاد، على الرغم من أن بعض العقول المنطقية تنبأت بحدوث هذه الحالة التي كانت وشيكة

محمد عبيدات: مبيعات الجاهز تتحرك للتفوقعلى نظيرتها على الخريطة

من جانبه أشار محمد عبيدات، الرئيس التنفيذي للتكنولوجيا في شركة بوروبرتي مونيتور إلى أن الجميع يدرك الوضع الحالي للسوق العقاري ونملك اليقين بأنه سيتحول قريبا للاتجاه الأعلى. ونرى أنه، بالنسبة للعديد من المشترين، فهذا هو الوقت المثالي لشراء منزل في دبي وأصبح الحلم هذا في متناول اليد حسب أسعار السوق الحالية
وذكر عبيدات أن بيانات نظام بروبرتي مونيتور تشير إلى أن مبيعات المنازل الجاهزة قد تخطت في الآونة الأخيرة مبيعات المنازل قيد الإنشاء في المشاريع المطلقة مؤخرا، وهذا أمر منطقي لأن العائلات المشترية لا تقدر أن تقوم بالدفع والانتظار لبناء منزل وفي نفس الوقت دفع الإيجار أيضًا، فهي تحتاج إلى منازلها الآن، وبالتالي فهي أكثر ميولاً إلى شراء المنازل الجاهزة في نفس الوقت

Ask The Agent

I have a property portfolio of a mix of 1 and 2-bedroom flats in JLT and Dubai Marina. With this in mind, how do I capitalise on what I have?

Seek professional advice as to how to manage your real estate portfolio. Many landlords across Dubai are bound to miss out on the revenue-generating opportunities that Expo 2020 will bring because of poor or non-existent planning. A competent property manager will provide you with the best opportunity to maximise your financial gains by giving you an assessment of the opportunities, and a strategy and activity plan designed to harness the financial potential of your property. Do not make the mistake of leaving your planning too late. You will need to comprehend current and likely future market conditions and events, likely risk factors that may enable or inhibit revenue growth, inflation and cost increases, and a complete comprehension of financial modelling and the ever-developing area of industry policy and regulation.

I am considering buying property to offer for rent. I am looking at two similar offers, one of which is located within 150 meters of a metro station and offered at a premium of around 8 percent. Is this reasonable?

Let us first look at why properties situated close to the Metro can command a premium. It is all about convenience, cost and lifestyle efficiency. Your prospective tenants can enjoy a cost-effective, fast, comfortable and reliable mode of transport to either travel to work, visit friends or even do some light shopping. No traffic hassles, road works, parking, and wear and tear on the family car while the requirement for a second family car is diminished. Many tenants are prepared to pay a rental premium for a property which allows them to enjoy these benefits. Our studies have shown that properties located within a .5-kilometre radius of the Metro in Dubai can command between a 6 percent and 11 percent premium when compared to similar properties with no feasible ambulatory access to a metro station.

My apartment is ready. When I said that I want to inspect it the developer said they already completed their inspection. Is this right?

Technically, once an official Completion Certificate has been issued for the building by the Dubai Land Department, it is deemed ready for handover and your contractual obligations regarding transfer of ownership remain. Nevertheless, I doubt if the developer has your best interests at heart in this instance. You have the right to inspect (snag) your apartment and report any legitimate issues to the developer for rectification. Items which can be remedied in the short term should be fixed immediately. Remember, once you have taken ownership of the apartment, the developer is obliged to fix any issues that may arise for a full 12 months following the transfer of ownership. It is in your interests to snag your apartment, and I strongly recommend you engage a professional to do this on your behalf.

What is the difference between a leasing agreement and a property management agreement?

You enter into a leasing agreement when you wish your real estateto locate suitable tenants for your apartments, facilitate the signing of the tenancy agreement leaving you to assume the responsibility and devote your time to managing the tenant and all aspects of the property thereafter. A property management agreement includes a lot more. A competent property manager will provide an assessment, strategy and activity plan. Considerations include history, current market and risk factors, industry knowledge extending to policy and regulation, finance and market dynamics. An activity plan will be provided covering pricing and marketing, customer relationship management, tenant management and policy, cost management, maintenance supervision, communications and review schedules, status reporting, financial reporting and resourcing. All of these activities will be performed by the property manager under a property management agreement.

Question of the Week

With Expo 2020 coming, is there anything I should do differently with my two apartments in Dubai Marina from a leasing point of view?

Timing will be critical to the decisions that you make regarding the management of your property. First of all, you need to get professional advice as you require a skilled and knowledgeable property manager to help you harness the true financial potential of your property during this unique period in Dubai’s real estate history. You need to appreciate that there will be some nuances and important considerations when looking at the opportunities that the World Expo 2020 will provide. For example, overall values will change but differing asset types and locations will not necessarily move in unison as Expo preparations move ‘from the analytical and planning phases through to implementation and eventual launch and operational phases. Initially, it is likely that investor demand will drive much of the value appreciation to be followed by an increasing rate of end-user demand for accommodation, both for villas and apartments. Those areas in proximity and with easy access to the Expo 2020 site itself will attract initial attention. However, as the event draws closer, demand for more centrally located property will also increase. One can expect both the rental return and capital return curve to steepen as we move closer to the event launch.

Affordability Matters Most

This year’s Cityscape Global Exhibition and Conference is forecast to be the largest yet and comes at a time when Dubai’s Real Estate industry is expected to start entering a cyclical growth phase in the lead up to the World Expo 2020.

The importance of Cityscape Global cannot be overstated. As with many exhibitions, it provides a concentrated and focused forum which allows the industry to showcase its vision and capabilities and demonstrate what shape Dubai will take in the future. But Cityscape is much more than that.

Cityscape Global is an open invitation for all stake-holders to understand, evaluate, participate and prosper in an industry that continues to literally change the shape of Dubai. It is a meeting place of some of the biggest and brightest minds representing all stakeholders in the industry and a confluence of opinions, ideas and opportunities which are shared, debated and developed. It allows stakeholders to gain a macro sense of in-dusty direction and a micro understanding of the various elements that will shape the industry going forward.

For buyers and investors, there is no better place to gain an appreciation of the myriad of opportunities that are on offer, but the sheer scale of the exhibition can become a little overwhelming, especially when you are looking to invest.

As a general theme for this year’s Cityscape, I will be advising most of my investors to look for value opportunities in the affordable housing segment, particularly in the Dubai South areas, as this segment in this location is likely to be the subject of some very attractive easy payment plans to further enhance affordability and, to some extent, mitigate risk.

This segment has outperformed its more luxurious alternatives for some time now and continues to show lots of potential, even though the recent cyclical correction. Affordable properties will continue to be on high demand as Dubai’s population growth gains momentum during a period of expected strong economic growth leading up to the end of the decade. And while the value is irrefutable, the risks associated with investing in the affordable segments of the industry as opposed to the luxury segments are much lower. Demand for affordable accommodation will continue to grow as Dubai’s population swells in the run up to the Expo. As Dubai continues to grow, so does the need for affordable housing.

Yet, although I see great value in investing in the affordable segment, it doesn’t mean some interesting opportunities won’t appear in other segments as well.

So, while you might focus on identifying opportunities in the affordable segment, you need to keep an open mind and be wary of unique opportunities that may be present.

I always advise my clients that the best way to get the most out of the event, is to canvass all the interesting opportunities on display and gradually yet efficiently establish a short list of the best opportunities.

Establishing such a list from an exhibition as huge as Cityscape is not easy and requires a disciplined approach. This is where a property asset management professional can assist…

Why? It’s important to understand what factors are going determine the potential of any investment. For property, these factors include everything from macro level influences such as global economic performance and policies, geopolitical issues, currency rates and oil prices to more regional or local factors such as industry supply I demand levels, consumer confidence, government policy and regulatory framework, industry cycles and liquidity in the marketplace.

So, in reality, a lot of the work in ensuring that investors and potential buyers make the most of their Cityscape experience is actually done beforehand in preparing an understanding of what the overall investment environment looks like. This enables a more efficient and focused assessment of all that is on offer.

But in addition to understanding the invest environment, it’s important for the investor to understand why he or she wants to invest in property and what the investment objectives are. Too many investors formulate the answers to these questions “on the run”, once they are traipsing around the exhibition. This lack of preparation just leads to confusion and ultimately, poor decision making.

Every industry has its shows, whether it’s the myriad of motor shows held around the world, film festivals, fashion events, airshows and the property industry is no different. What many don’t understand is that Dubai’s Cityscape Global has established itself as one of the best Real Estate and Property events globally… and its right on our very own doorstep!

So, for those of us with a passion for the industry, it is going to be an exciting 3 days. It always seems to end too early!

ASK THE AGENT

Which would be a better investment, buying a townhouse or an apartment?

In the UAE where there is a great deal of variation in the properties on offer, making a choice becomes all the more difficult for those who are new to property investment. The market rarely moves uniformly. There is always a difference in the investment returns to be expected from different asset types, in different areas, at different stages of completion, over different periods of time, being completed by different developers. Invest in affordable apartments or construct a portfolio of affordable apartments and townhouses, and even villas, as the case may be. But do take note of the keyword here which is “affordable.” There are many projects scattered all over the country that are filling the affordable housing void. These offer high quality, reasonably priced and extremely spacious homes with the potential to provide excellent returns as affordable housing will continue to be in demand.

I want to give my tenant a one-year notice to vacate the flat. Is there a format and any other formalities?

You need a valid reason for requesting the tenant to vacate the premises. Has the tenant breached the tenancy agreement? Has the tenant broken the law by utilising the premises for an unlawful purpose? Do you want to sell the property or occupy it yourself? if the tenant has breached the agreement or broken the law in some way, you must serve a 30-day notary public notice. It must clearly state why the tenant is being given the notice. If the tenant does not respond to the request, you can go to the Rental Dispute Settlement Center and request an eviction order. If you want to sell the property or use it yourself, you need to give a 12-month notice stating your intention through the notary public. The notice should be delivered by courier. Keep a record of the delivery report as evidence of receipt by the tenant if he refutes receiving your notice.

I am interested in working for a real estate broker as I have experience in the US. Can you please advise.

Since the UAE market is unique while sharing some general characteristics with global real estate hubs, I suggest you join a company that will enable you to fast-track your learning and mastery of the UAE property market. Go for a full service company to gain a greater understanding of what the local real estate business is all about, who the key players are and the procedures you need to be familiar with. The company you choose should be prepared to invest in you by providing you with the types of learning experiences that come with formal training (mandatory to become a licenced agent in Dubai) and in-house training. This may involve being assigned to a mentor, being placed on an internal rotation scheme to enable a broader knowledge of the business, or being given special projects that will facilitate learning. Firms that invest in high-potential people typically succeed. Surround yourself with people who are passionate about the industry.

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

Initially, your landlord needs to give you the notice of increase at least 90 days prior to the expiration of your current contract. You should familiarise yourself with Law No. 43 which introduced the following restrictions (summarised) with regard to legally allowable rental increases:

There should not be any rent increase if the rent for the real estate unit is no more than 10 per cent below the average rent that a similar property commands within a neighbourhood
The annual rent increases can range from 5 up to 20 per cent according to how much the current rent is less than the market average
The market average rates are to be determined by the RERA rental index

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

Question of the Week

I have mortgage on an apartment that I live in and I happen to have some cash currently. Should I settle my loan or invest the cash elsewhere?

It all depends on what interest rate you are paying on your mortgage, and what return you could expect if you invested elsewhere. If you can achieve a return greater than your mortgage interest rate, then you should invest the cash elsewhere and take advantage of the low mortgage rate you will be getting. There are some very attractive mortgage products in the market, with a few mortgage providers offering rates for as low as 3.99 per cent or even 3.49 per cent. If you have a mortgage with such a low interest rate, it would not be too difficult to find an investment that will yield in excess of your mortgage rate. For example, you may consider investing in an apartment which will provide you with a net annual cash flow of 5 per cent, and over a period of five years, an annual capital appreciation of anywhere between 5 per cent and 7 per cent. This would be a more lucrative allocation of your cash. If, however, you are not confident about achieving a return on your cash that exceeds your mortgage rate, then I suggest you pay down your mortgage outright as you will definitely be able to save on interest costs.

Alternatives real estate assets

While Real Estate Investment Trusts are common in many Real Estate Markets around the world, they are a relatively new here in the Middle East with the Emirates REIT, being the first, launched in 2010. 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. Now, more recently, there has been a second REIT launched in Dubai, the ENBD REIT.

While there are advantages for any industry 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.

Investing in 2017? Five key points to ask

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

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.

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?

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?

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.

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?

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!

Ask the agent

Question: I have been in the UAE for a long time, and accumulated a portfolio of 17 apartments and a couple of villas located all over Dubai. Everyone knows that the market is on a slowdown so is there still a way to make any profit during this period?

There are too many investors who are under the illusion that investing in property is almost a “set and forget” proposition, but nothing could be further from the truth. The property industry is incredibly dynamic and requires constant attention as factors influencing its performance as an investment are as broad as they are complex.

Investing in property is no different to investing in any other asset. Its purpose is to create wealth but, in order to do that, it needs to be nurtured, maintained and managed just like any other investment. Ask yourself a question: Would you create a share portfolio without monitoring and managing its health and performance? Of course not, and having a property portfolio is no different.

With a portfolio this large, you need professional help to manage your property investment, particularly during times when yield is harder to generate. It requires careful thinking about what the true earnings potential of the portfolio really is, and what is the most efficient and effective way to go about realizing that potential. You need 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.

Essentially your property manager should be capable of managing your business which just so happens to be a property portfolio. Remember, it’s your investment, and you need to ensure it’s in good hands providing you with the returns you expect with as little hassle as possible.

Choose wisely as once you appoint a property manager, your ultimate return on investment is largely in his hands.

QUESTION: I have a well-maintained 1-bedroom apartment in Queue Point, Liwan. When I purchased it, the selling rate was at AED 550 per sq.ft. Should I continue to rent it out or sell it now?

Properties located in non-prime areas such as Dubailand have been doing very well even in the current market scenario. Even in the recent past, we have witnessed the more affordable properties in the market, including those in Dubailand, doing quite well in terms of significant value growth and ongoing sales activity as there remains a supply gap in the truly “affordable” property segment.

As mid to upmarket property in prime locations have become unaffordable for some homebuyers and investors, people have turned to more reasonably-priced projects like Remraam, Skycourts, Queue Point, etc., which promise capital appreciation even in the current market climate. These developments are still young, and more growth and infrastructure development is still in the offing.

There is no doubt that you would still make some profit if you sold today; however, we expect values to still improve, especially as the infrastructure and landscaping around the development gets completed. I suggest you retain the apartment for at least the next 5 years as you will continue to benefit from superior capital growth and enjoy at least 8 percent net annual rental returns in the meantime.

Question: Am I right in thinking that rental rates are not as affected by the market slowdown as sale prices? I was expecting a big reduction in my rent but our landlord told us it will remain the same.

Yes, you are partly right. The current industry climate has affected sale prices more although rents have also fallen in certain areas which only means the market slowdown has varying effects on different areas and property types. Regarding your rent, what will determine whether the landlord can raise your rent or not is how your rental levels compare with the new and updated index.

You should familiarize yourself with Law 43 which was issued on 22/12/2013 and replaced Decree # 2 of 2011. It introduced certain restrictions with regard to the calculation and implementation of legally allowable rental increases.

Having said that, it does not set out to control the rental value of new contracts and where a property is to be let for the first time or to a new tenant, it is up to the owner and prospective tenant to agree as to how much rent should be charged for the property.

However, for your peace of mind, you can compare your rental rate to the current market rate by using the RERA rental increase calculator online by visiting: http://www.dubailand.gov.ae/English/Pages/Rental-Increase-calculator.aspx

While it has its limitations, it is a useful tool that is also being used by landlords as a reference point for determining rental rates.

Question: I have just received an offer from a bank representative to refinance my property. Is this an opportunity I should avail of or not?

Very easily, I can say the answer is YES, but only if it makes financial sense! In short, you need to make some quick but careful calculations.

There are some very attractive mortgage products in the marketplace with a few mortgage providers offering rates as low as 3.99% or even 3.49% which signals that competition among UAE banks for higher market share of the mortgage market is getting pretty intense.

There are a number of things you need to consider such as, is there an early payment penalty for your current mortgage? It may well be that you will need to pay a hefty fee to exit the existing contract.

While 3.99% is an attractive rate, how long are you guaranteed this attractive rate? Interest rates will eventually rise and this eventuality needs to be understood by mortgagors as the attractive 3.99% interest rate enjoyed today will, in all probability, be replaced with a significantly higher rate in 2 years’ time, requiring increased mortgage payments to cover the interest rate hike. You need to factor this into your financial planning.

Will you need to pay any establishment fees for your new mortgage contract? With the mortgage market becoming so competitive, you should be able to have any fees waived.

Finally, make sure you can pay out your new mortgage contract at a future point in time without any penalty. This is an unnecessary expense that you should not be burdened with.

Additional:

Question: I am coming from overseas and looking to rent a home. I heard about this thing called “district cooling.” What, exactly, does it mean?

District cooling for the provision of chilled water has emerged globally as a way to provide cooling to buildings in a more environmentally sensitive way. It is considered to provide great benefits in the long run and, in addition, helps in saving on the costs of electricity which will be reflected in lower DEWA bills of tenants.

You will find that most of the units which are serviced by chilled water district cooling are offered at slightly lower rental rates. However, you should enquire as to how your cooling charges will be calculated and enquire as to all the charges which are included in the cost. You may even ask existing tenants how much they are paying currently before you commit to a tenancy contract.

With regard to consumption charges, I am assuming you will have a BTU meter installed in your future apartment? If so, you will be billed directly by the cooling services provider based upon what you actually consume in terms of cooling. The more you use, the more you pay.

Having said that, the DEWA savings will be offset somewhat as you may incur an additional utility charge as some owners of units that are equipped with chilled water district cooling will be passed on the slightly higher utility charges that they incur which involves the remuneration of the capital costs of providing the infrastructure that delivers the chilled water to the unit. This charge will, in all likelihood, be calculated as a pro-rata of the actual consumption charges.

Nevertheless, in most cases, developers have managed to offer better value for money while helping protect the environment.

By Mohanad Alwadiya
CEO, Harbor Real Estate
Advisor & Instructor, Dubai Real Estate Institute (DREI)
Published in Freehold – Gulf News
Dated: 30 April, 2016