INDUSTRY INSIGHT
Dubai real estate prices have steadily declined for more than two years and might not be this low again, so there may never be a better time for those with the financial means to climb onto the emirate’s property ladder. Buying off-plan is the most affordable option and the perils of making such investments are much diminished compared with the previous decade when Dubai real estate became both synonymous and notorious for off-plan speculation as some investors made a quick killing flipping properties and others put down big deposits for projects that were never finished.
Developers now need to adhere to much more stringent legislation that links progress payments to construction milestones and stipulates what they can and can’t do with purchaser funds. But would-be investors still have much to consider.
If you’re buying off plan factor in handover delays — whether by design or mishap, few developments complete on time. Ask yourself what would it mean to your personal circumstances if your apartment was delayed by one to two years. Consider the developer’s track record and visit their past developments.
Don’t be fooled by misleading adverts offering too-good-to-be true offers like ‘Book now with just Dh5k’ that relates to only the booking fee.
Payment plans are more attractive these days — the most common is for 50 per cent payment during construction and 50 per cent on handover, but you can find better.
Emaar is one of the few developers to still demand the bulk of payments during construction, although it is also among the few that banks will fund off-plan.
That means buyers can borrow up to half the cost of their Emaar unit, use this money to make the required payments during construction and then repay the bank over a longer period.
Borrowing costs are likely to rise this year, with US interest rates slated for three separate 0.5 per cent increases in 2017 — official UAE rates will follow because of the dirham’s dollar peg and likewise so should banks’ mortgage rates.
Buyers market
Most tenants would like to buy but can’t because of the high upfront costs and hefty deposits required
Dubai remains a buyers’ market, although sales activities increased markedly in late 2016 and this spike in activity has continued into early 2017.
Potential buyers should shop around. Invest the time. Do your research. There are lots of new communities and new buildings, so talk to residents, security guards and even local business owners. They’ll give you great insight.
The dynamics of Dubai’s property market make it attractive to buy-to-let investors — propertyfinder.ae research indicates 70 per cent of UAE residents are tenants despite expats making the country their home for longer than ever before.
Most tenants would like to buy but can’t because of the high upfront costs and hefty deposits required, while a minority prefer to invest in their home countries instead. All this means there’s a steady pool of tenants for landlords.
Smaller units — studios and one-bed apartments — provide the best yields, although affordable 2-3 bed villas and townhouses also make excellent investments.
Yields are higher in less established communities — Propertyfinder’s latest data shows Al Furjan (10.3 per cent) and Dubai World Central (10 per cent) offer Dubai’s biggest apartment yields, followed by Silicon Oasis (9.6 per cent), Dubai Investment Park (9.2 per cent) and Sports City (8.4 per cent).
For villas yields, Dubailand leads with 7.4 per cent, then Reem (6.9 per cent), Akoya (6.9 per cent), JVC (6.1 per cent) and The Springs (six per cent).
If you can afford the deposit and qualify for the loan, then seriously consider buying — even if you lose your job, or decide to move back home or elsewhere in the next few years the rent alone should cover your mortgage and property costs. Expectations are prices to be considerably higher come 2020.