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I own apartments in Downtown Dubai. I am planning to sell a few to buy villas or townhouses in a well-known community. Will it be a good move?
It depends on two basic criteria: 1)if you are an investor or end-user, 2) whether you are an investor with a long or short-term view. If you are an investor, keeping them would be the better choice especially if you are the first owner and have kept them well maintained. The most recommended way, however, is to diversify, e.g. sell one or two apartments and buy a villa/ townhouse. You don’t need to focus on luxury properties only. Have an investment portfolio with a mix of luxury, mid-segment and affordable housing. Also consider a location that is expected to grow in line with the city’s future growth plans. Following the current trends, affordable housing is doing well for sale and resale. As for an end-user, a villa would be better as it is more spacious with lesser service charges.
I just moved to Dubai and renting an apartment. I am planning to buy an apartment in a good location. Is it the best time to buy?
Now is a good time to turn from being a tenant to an owner. In most places, prices have gone down. There are even distress sellers who are willing to sell below the market price while rents have been stable, and in some places increasing slowly.
Some banks provide great mortgage offers right now. The monthly outgoing will be considerably less than your rent in most cases. Terms and conditions apply to any mortgage package and vary from bank to bank.
Before buying a property, set your budget and your priorities (family, work and others) then calculate how much you can afford. See the opportunity cost of renting vs. buying. If your rent will be cheaper than your mortgage, you may be able to invest the difference and earn a better return on a long-term basis. Also consider your total net worth.
I am buying a new villa and planning to get a mortgage from my bank. What is the next step to make?
Get the mortgage first, the property second. It is easy to choose a property once you know your eligibility which is decided by your banker/ mortgage consultant. There are over 300 mortgage offers across the UAE. It is worth taking time to find which one suits you best. Many applicants simply go to their existing bank for a loan; however, they might be missing out on better deals that can be obtained by doing a little research. If the thought of dealing with this seems exhausting to you, there are mortgage brokers who can do the work for you and help you with all the required paperwork. Before taking a mortgage, have a realistic budget. Understand what you can afford as you need to make a down payment which is typically 20% of the purchase price. Understand the fee structure as well. The right deal for you depends on a variety of factors.
I am looking for a new place to stay because of the high rent of the place where I am staying, but rents in some old apartments are high. Why?
The rental values of apartments are usually based on location, level of lifestyle, convenience and security. If the apartment has spectacular views, is close to transportation links and is accessible to supermarkets, schools, hospitals, and shopping and business districts, its rental rate will be high. Most tenants consider these when looking for a house. As neighbourhoods improve, property values go up as well. When new businesses and services come into an area, these turn a community from simply acceptable to desirable. Homes close to or within Dubai Marina, Downtown Dubai and Palm Jumeirah command a location premium.
If you are looking for a new place to stay, renting in affordable areas with great environments is the best move. Rents in particular areas remain high due to changing market conditions, escalating cost of living and high maintenance.
Question of the Week
I am an investor planning to invest in the real estate market in Dubai, but still have some doubts. What is your take on this?
No matter what the situation of the real estate market is, it should not affect investors with a long-term view. In 2011, when the real recovery happened, the total value of real estate transactions in Dubai reached Dh143 billion. The next year, it reached Dh154 billion. Over the following years, real estate assets worth Dh218 billion were sold in Dubai as per data released by a reliable financial institution.
Now is a good time to invest in the emirate because this year, its real estate market will not likely to move too high or too low. It will continue to grow and benefit from continued demand.
As we all know, the supply of properties is greater than the demand which makes the market easy for investors to penetrate because they can choose from different property classes. When you are investing in real estate, you are really investing in the economy.
With the upcoming Expo 2020, the market is likely to continue its growth path. The market itself is undergoing changes towards stability and better support.
If it is superior yield with minimal capital outlay you are after, Dubai real estate is the best. Investors with a long-term view should be happy investing here now and enjoy a rental yield of 6-9% depending on asset class, with a positive hope of property values increasing as the Expo draws near.
Source: Sanket Khanna, Special to Freehold
CEO and Founder, SNS Properties