Finding value-for-money deals
We ask brokers what’s a good yardstick for the right property
It’s the perfect time to shop around for value deals in Dubai’s real estate market with property price valuations at their most attractive. Investors are taking the correction in prices as an opportunity to buy good properties at competitive prices, in prime locations with excellent views and well-maintained. For many homebuyers, there is indeed a lot of value-for-money options, but finding the right ones can be a challenge. It is important to look at the market from a long-term perspective to truly understand the value and strategic importance of the current phase of the market, says Pawan Batavia, CEO of Synergy Properties. “The long-term story on the Dubai growth, with the current infrastructure, spends, Expo 2020, the changes in rules recently, will surely have a very positive impact on the overall situation at a macro level,” says Batavia. While property prices have been going down, Riyaz Merchant, CEO of Realty Force Real Estate Broker, says the market has generally reached its bottom. “I don’t see it moving down except in case of distress deals where there is a need for owners to encash or exit due to their circumstances or financial needs,” says Merchant. He sees the demand being dispersed into different areas, creating a fairer and more competitive market based on people’s personal preferences. “The market as a result is on the rise; we
are no longer at the bottom and must now assess markets in more detail, based on projects,” says Merchant. “This is probably the best time to enter the market and make the plunge for homeowners as master developers like Emaar and DP have made it easy with long post-handover payment plans, and waived service and DLD registration fees. This has made it easier for an end user to take the plunge without having to be worried about mortgage and interest repayments.” He adds: “Dubai also offers spectacular views that no homeowner can get anywhere, the fees to register their property are much lower and they are not paying unjustifiable property taxes.” Comparing Dubai with other global real estate markets, Merchant says there are clear advantages here for investors looking do diversify. “For the investor, income is tax-free and the returns offered in Dubai are unrivalled by international markets,” says Merchant. “In London, their income would be taxable and their returns maybe 7-8 per cent before taxes and 3-4 per cent after taxes. “Dubai laws are so strict that tenants here rarely default on rental payments, whereas in other markets it is prevalent and the costs incurred to get the tenant out can lower the average 10-year return from 4 per cent net to 2 per cent in cities like London or Mumbai.”
Tourists and business travellers visiting Dubai continue to wield the upper hand as hotel room rates in the emirate have once again fallen in the third quarter of this year. Amid rising supply in the market, Dubai’s average daily rates (ADR) declined by 9.2 per cent to Dh432, alongside the revenue per available rooms (RevPAR), which too fell by 12.2 per cent to Dh296 in the third quarter against the same period last year, according to the latest data exclusively shared by global consultancy firm STR. However, on a quarterly basis, the decline was more profound as ADR and RevPAR recorded a drop of 26.6 per cent and 25.4 per cent, respectively, in the third quarter in comparison to the previous one. While Dubai remains one of highly active hospitality markets in the region with a 68.6 per cent occupancy lev-
el, the emirate recorded only 2.9 per cent growth in hotel demand (room nights sold) against the supply increase of 6.4 per cent year-on-year during the third quarter. “There are several factors contributing to the decline, and new supply is crucial among them,” said Philip Wooller, area director, Middle East and Africa, of STR. “Dubai is growing like no other market and is set to become one of the world’s largest hotel markets in the next few years.”
Supply scene
More than 20 new hotels have opened in Dubai as of September, adding close to 5,850 rooms in the market. The supply scenario is expected to be compounded as the emirate is currently having a pipeline of 36 new hotels that will bring around 10,560 additional rooms by the end of the year. Given the new supply entering the mardeclined
ket, Wooller said finding the balance between new supply and demand is going to be very difficult, but thus far “Dubai has succeeded pretty remarkably”. “However, the next two years could produce supply growth of 12 to 15 per cent each year, which is likely to put pressure on all KPIs,” said Wooller. For Dubai hoteliers choosing to fill up their rooms rather than keeping them vacant, they had to lower their ADRs — something that also impacted their RevPAR. “Average daily rates have
as hotels have been forced to offer discounts in the face of more competitive market conditions,” said Craig Plumb, head of research of JLL Middle East and North Africa (Mena). He said another factor that is causing a reduction in average room rates is the growth in budget and mid-market hotel supply, and “this sector is likely to grow further over the next few years, putting further downward pressure on average room rates”. Wooller agreed that Dubai hotels are now seeing a lot of competition as all classes are trying to drive market share by offering attractive rates. “The UAE is facing competition with other tourist destinations such as Egypt, which is now gathering in strength as a great value holiday destination after years of decline. Turkey, due to currency devaluation, and the Euro Med markets
are all doing very well too,” he added.
Mid-market hotels
Since the market over the past year has been seeing growth in the number of Chinese and Indian visitors, Plumb said “this is likely to continue to drive the trend towards the mid-market segment”. Experts point out that there is a need to develop more mid-segment products in the UAE. “We don’t see market demand shifting, but the appeal of Dubai is being extended to all nationalities and demographics, and more affordable accommodation is needed to meet this demand,” said Wooller, noting that source markets like India and
China are keys to the growth of Dubai’s tourism industry. “We continue to see great potential here, reflected by the emergence of new source markets such as China and India, and expect to double the size of our portfolio in the coming years,” said Carlos Khneisser, vice-president of development, Mena and Turkey, at Hilton, which has 22 operational hotels in the UAE. “With the number of visitors coming into Dubai in particular now on a level with global destinations such as Paris, London and New York, the market needs to continue to evolve to cater for this demand — and that means developing a more affordable or ‘midscale’ offering,” he said.