propertytimes

Factors that will impact the Real Estate Sector in 2017

Published: Propertytimes, May Edition

With the advent of globalization and the exponential rise of cross border capital flows, the number of factors that affect local economies and the industries that operate within those economies has increased dramatically in both number and complexity. Here are some that we will be considering as we advise our clients in 2017.

Oil. Despite the amount of diversification that has occurred in the Dubai economy and the small proportion of Dubai’s GDP that oil represents, the price of oil still affects liquidity levels, oil dependent economy’s performance and overall investor confidence. There is no doubt that that maintaining oil at or above the $50 / barrel for the duration of 2017 will assist in creating market stability.

Currency rates. With anywhere between 40% and 50% of investment in Dubai property coming from investors who usually deal in currencies that are not pegged to the US dollar, any strengthening of the US dollar makes it more difficult to invest in Dubai for those investors. A recent example is the devaluation of the Russian ruble which resulted in Russian investment declining significantly in Dubai’s property market. The USD is likely to strengthen in 2017 as we see the US Federal Reserve continue to raise interest rates and the effect of Trumpenomics and “America First” protectionist policies begin to take effect.

Political instability. Almost omnipresent for well over a decade, the level of political instability in the world today seems unprecedented. From Middle East conflicts, Chinese actions in the South China sea, North Korean nuclear ambitions, Brexit and even significant dissatisfaction with the US election result and subsequent presidential performance, the world is a very unsettled place which leads to investor nervousness. There are no signs that political instability is going to ease any time soon.

Demand and supply. As always, economic fundamental will always play a role in any industry performance. 2017 will see a continuation of balancing of the demand / supply situation in the market as the recent pivot towards affordable properties makes up a greater proportion of deliveries and the demand generated by the rapidly approaching 2020 Global Expo accelerates.

Legal framework. The legal framework that has been developed for the property industry in Dubai has is both comprehensive and effective in protecting the rights of tenants and investors and holding developers to account. Developments will continue in 2017 further increasing the already high levels of confidence among investors with regards to their legal protection and risk minimization.

Mortgage market/ regulations. Historically, mortgages have represented no more than 30%-35% of property sales in the emirate. This ratio has now climbed to well over 45% during 2016 and, in some months, levels of 60+% were achieved. This is great news for several reasons.

First, this trend highlights both confidence of lenders and consumers, mostly owner occupiers, in the market. The second reason why this is such good news is because we are witnessing, in real time, the market adapting to legislative changes that were made in early 2014. There is no doubt that the implementation of the mortgage caps earlier in 2014 had affected the demand for many first home buyers who were relying on a mortgage to acquire their dream home

Finally, a growing number of mortgages are being undertaken for properties that are purchased in the more affordable areas of Dubai, which further demonstrates the systemic shift to affordable housing in the Dubai property market is becoming even further entrenched as a long-term characteristic.

Confidence levels/ buyer’s sentiment. Confidence levels of investors globally have been shaken by the global events of the past few years. The levels of uncertainty surrounding economic policies, geo-political turmoil and social discontent in many countries around the world has created an environment of indecision amongst investors. Nevertheless, the property industry has weathered this quite well and showed a maturity and flexibility that wasn’t evident earlier in the decade. Sure, prices have declined since 2014, but this has been more because of a much-needed market correction. While global events have had an effect, the market’s resilience has been impressive.

Performance of other investment instruments (stock markets, gold, equities, bonds). There is a global competition for a greater share of the capital pie. Capital will always follow the best risk adjusted returns and movements can be swift and of great magnitude. They can be so dramatic that some governments will restrict capital flows. For example, China recently announced new restrictions on capital flows out of the country. Observations from property industry pundits all around the globe suggest the new restrictions are already putting the brakes on what has been the biggest global real estate accumulation by any nationality in modern times. While Chinese demand will continue to benefit many markets those who had not previously established off-shore assets will find it significantly more difficult to invest beyond Chinese borders until the restrictions are raised.

Infrastructure development / government spending. The ongoing commitment to economic development and the associated infrastructural spending has been well-chronicled. The continuing preparations for the 2020 World Expo will help the local economy achieve around 3.5% GDP growth for the year which is very healthy by global standards.

Taxes and transaction costs (registration and transfer fees, commissions, NOC fees) The costs of transacting in real estate in Dubai compare well globally and no new costs or fees are expected to be introduced in 2017. Somewhat conversely, we expect the slew of offers in the market place designed to increase affordability to continue. Great news for first home buyers and investors.

Annual service charges and overall cost of ownership (utility fees, maintenance, insurance, PM costs) Similarly, the costs of owning and operating property is expected to remain stable and should not affect buyer’s decisions other than normal calculations regarding yields, cashflow and asset protection.

FACTORS THAT IMPACT THE REAL ESTATE SECTOR

By: Mohanad Alwadiya
Published: Gulf News Freehold

With the advent of globalization and the exponential rise of cross border capital flows, the number of factors that affect local economies and the industries that operate within those economies has increased dramatically in both number and complexity. Here are some that we will be considering as we advise our clients in 2017.

Oil. Despite the amount of diversification that has occurred in the Dubai economy and the small proportion of Dubai’s GDP that oil represents, the price of oil still affects liquidity levels, oil dependent economy’s performance and overall investor confidence. There is no doubt that that maintaining oil at or above the $50 / barrel for the duration of 2017 will assist in creating market stability.

Currency rates. With anywhere between 40% and 50% of investment in Dubai property coming from investors who usually deal in currencies that are not pegged to the US dollar, any strengthening of the US dollar makes it more difficult to invest in Dubai for those investors. A recent example is the devaluation of the Russian ruble which resulted in Russian investment declining significantly in Dubai’s property market. The USD is likely to strengthen in 2017 as we see the US Federal Reserve continue to raise interest rates and the effect of Trumpenomics and “America First” protectionist policies begin to take effect.

Political instability. Almost omnipresent for well over a decade, the level of political instability in the world today seems unprecedented. From Middle East conflicts, Chinese actions in the South China sea, North Korean nuclear ambitions, Brexit and even significant dissatisfaction with the US election result and subsequent presidential performance, the world is a very unsettled place which leads to investor nervousness. There are no signs that political instability is going to ease any time soon.

Demand and supply. As always, economic fundamental will always play a role in any industry performance. 2017 will see a continuation of balancing of the demand / supply situation in the market as the recent pivot towards affordable properties makes up a greater proportion of deliveries and the demand generated by the rapidly approaching 2020 Global Expo accelerates.

Legal framework. The legal framework that has been developed for the property industry in Dubai has is both comprehensive and effective in protecting the rights of tenants and investors and holding developers to account. Developments will continue in 2017 further increasing the already high levels of confidence among investors with regards to their legal protection and risk minimization.

Mortgage market/ regulations. Historically, mortgages have represented no more than 30%-35% of property sales in the emirate. This ratio has now climbed to well over 45% during 2016 and, in some months, levels of 60+% were achieved.  This is great news for several reasons.

First, this trend highlights both confidence of lenders and consumers, mostly owner occupiers, in the market. The second reason why this is such good news is because we are witnessing, in real time, the market adapting to legislative changes that were made in early 2014. There is no doubt that the implementation of the mortgage caps earlier in 2014 had affected the demand for many first home buyers who were relying on a mortgage to acquire their dream home

Finally, a growing number of mortgages are being undertaken for properties that are purchased in the more affordable areas of Dubai, which further demonstrates the systemic shift to affordable housing in the Dubai property market is becoming even further entrenched as a long-term characteristic.

Confidence levels/ buyer’s sentiment. Confidence levels of investors globally have been shaken by the global events of the past few years. The levels of uncertainty surrounding economic policies, geo-political turmoil and social discontent in many countries around the world has created an environment of indecision amongst investors. Nevertheless, the property industry has weathered this quite well and showed a maturity and flexibility that wasn’t evident earlier in the decade. Sure, prices have declined since 2014, but this has been more because of a much-needed market correction. While global events have had an effect, the market’s resilience has been impressive.

Performance of other investment instruments (stock markets, gold, equities, bonds). There is a global competition for a greater share of the capital pie. Capital will always follow the best risk adjusted returns and movements can be swift and of great magnitude. They can be so dramatic that some governments will restrict capital flows. For example, China recently announced new restrictions on capital flows out of the country. Observations from property industry pundits all around the globe suggest the new restrictions are already putting the brakes on what has been the biggest global real estate accumulation by any nationality in modern times. While Chinese demand will continue to benefit many markets those who had not previously established off-shore assets will find it significantly more difficult to invest beyond Chinese borders until the restrictions are raised.

Infrastructure development / government spending. The ongoing commitment to economic development and the associated infrastructural spending has been well-chronicled. The continuing preparations for the 2020 World Expo will help the local economy achieve around 3.5% GDP growth for the year which is very healthy by global standards.

Taxes and transaction costs (registration and transfer fees, commissions, NOC fees) The costs of transacting in real estate in Dubai compare well globally and no new costs or fees are expected to be introduced in 2017. Somewhat conversely, we expect the slew of offers in the market place designed to increase affordability to continue. Great news for first home buyers and investors.

Annual service charges and overall cost of ownership (utility fees, maintenance, insurance, PM costs) Similarly, the costs of owning and operating property is expected to remain stable and should not affect buyer’s decisions other than normal calculations regarding yields, cashflow and asset protection.

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!!