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It seems that with all the new projects that have been announced over the past two years, Dubai’s real estate market is about to enter a new period of oversupply. What are your thoughts on this?
There is no doubt that developers have recommenced construction on many projects that were stalled during the recession, or launched new projects on the back of the market’s recent resurgence. Given the frequency of the headlines announcing new projects and the size of the developments being launched, it is easy to be concerned that an oversupply scenario may eventuate.
However, calculating optimal supply levels, particularly when emerging from a recessionary period, is challenging. It depends on an accurate estimation of demand for real estate assets, which will emanate from population growth. In Dubai’s case, this will largely be driven by overall economic growth going forward. In addition, one needs to comprehend a lag effect from the time that conditions conducive to development are identified by developers and when properties are completed and are released on to the market.
Given that Dubai’s economy is expected to grow at an estimated 5 per cent annually for the remainder of the decade and initiatives such as the World Expo 2020 are expected to generate an additional 270,000 jobs, the demand for housing and commercial facilities is expected to grow significantly. Much of the city’s planning estimates the number of people living in the emirate to grow to 3.4 million by 2020, or a 7 per cent annual increase from the current population of 2.25 million.
We take a minimum fiveyear view when trying to understand supply and demand. Taking into account the nature of the market’s resurgence, strong growth in fundamental economic drivers such as tourism and trade, levels of investment into infrastructure and initiatives, and stakeholder commitment to sustainable growth, we believe that while inventory levels may spike in the interim, they will not be excessive at the end of our five-year forecast period.
I own an apartment that is leased. The lease will expire in three months and I wish to refurbish the apartment and use it personally once the refurbishment is complete. Can you advise on any legal issues I might need to consider?
You need to consider the rights of the tenant. Law No. 33, Article 25 (2) provides protection to the tenant by stipulating the circumstances under which a tenant can be evicted.
If the landlord wishes to demolish the property or conduct construction that makes it impossible for the tenant to use the property, the landlord has grounds for eviction. This would appear to apply in your case. However, if challenged, you will need to provide proof of your intentions, such as plans, contractor agreements, etc.
A landlord who wants to use the property himself or give it to next of kin also has the right to evict a tenant. He will have to prove that he does not have access to an alternative property.
The landlord must give at least 12 months’ notice of eviction and provide the reasons and necessary documentation supporting it.
Therefore, I recommend you advise the tenant of your intentions in advance of the upcoming lease renewal as he or she could choose not to renew and vacate the apartment. If this is not the tenant’s preferred course of action, at least you have abided by the law.
I just had a problem tenant vacate my apartment. How can I ensure I don’t get another troublesome one?
Bad tenants can make your life very miserable. There have been many reports regarding tenant rights but I feel the rights of landlords should also be recognised as much.
There are some basic steps you should take. Set a meeting to get to know the potential tenant better, including his or her lifestyle and employment stability. Try to figure out his or her plans for the future as such details can often give you an insight into the type of people you are dealing with. This will help you instinctively understand a person’s character. Trust your instincts.
Request references or contact details from previous landlords to identify any past issues with regard to the care of rental property or missed rental payments.
Obtain a letter from the employer stating the tenant’s salary and a copy of a bank statement. You should check for regular salary payments into the account, which should correspond with the employer’s salary statement and also determine whether there is enough to cover rent.
Obtain a copy of the tenant’s passport and visa. Check all details to ensure the person you are talking to is the actual lessee.
Use the standard contract form provided by the Real Estate Regulatory Agency. Once signed by all parties, it should be registered in the Ejari system, and you should ensure all cheques are signed by the party to the contract.
Finally, engage a property management company to take care of all the above (and more) for you. You will sleep a lot easier and stand a greater chance of realising your investment’s potential.
I am new to Dubai, having started a new job six months ago. I am currently renting an apartment, but considering buying either an apartment or a villa for myself. What advice can you give someone new to investing in Dubai?
The first factor to consider is location as this can drive up to 90 per cent of the property value. The more established and prestigious locations such as Palm Jumeirah, Downtown Dubai and Dubai Marina and those close to the Metro will always command a premium, while areas such as Jumeirah Lakes Towers, The Greens, Dubai Sports City, Skycourts, Queue Point, Discovery Gardens and International City offer affordability and value for money. A lot depends on your budget and lifestyle.
Quality of product and maintenance services as well as the extent of completion and quality of infrastructure surrounding your intended home are important, along with considerations such as an owners association and its effectiveness.
With regard to the type of property, current and future supply of various asset types need to be examined. You should consult a reputable property broker to assist you with this. For example, villas across the board have outperformed other asset types because of supply shortages. However, when looking at the inventory pipeline, this may not be the case in the future with more affordable property likely to be in higher demand.
Financial planning is key. It’s important to know what you can afford in terms of repayments, whether you will need a mortgage, how flexible you can be should interest rates rise and what other demands may arise on your disposable income.
Finally, get yourself a good broker. As a newcomer to the Dubai real estate scene, you will benefit from the experience and knowledge that a good broker can bring to your property ownership aspirations.
Source: Property Weekly.