In search of the next hot location

How to find districts that still offer reasonable prices and huge potential for future gainsDeclan King - A chartered valuation surveyor and a Ricsregistered valuer, he is Director and Group Head – Real Estate of ValuStrat.

Whether a firsttime buyer or a seasoned investor, it is important to look for areas that have it all: an attractive built environment, solid infrastructure, reliable transport links and a likely return on investment. Some investors try to identify up-and-coming property locations, i.e. districts where they can get in early, at a  reasonable price, future gains above and beyond normal market performance.

What criteria do buyers look for when trying to search up-and-coming locations? Some follow new transport links as property price rises often follow new transport routes, others identify underpriced areas, which are adjacent to more expensive districts and considered well placed for a future price rise, while others look to new developments that offer quality build with the likelihood of valuation gains after some maturity.

Just over a decade ago, Dubai Marina, The Gardens and Arabian Ranches were considered remote locations, as Dubai was mostly centred around Deira and Bur Dubai. However, intervening years have seen massive infrastructural delivery, adding new highways, bridges and intersections as well as a new airport and the Dubai Metro and Tram networks. Dubai has since been able to expand southwards towards Abu Dhabi, along the Shaikh Zayed Road as well as eastwards to Mohammad Bin Zayed and Emirates Roads.

New developments

These improvements have opened up previously outlying lands to create new development zones, which are now well-connected. There has been an estimated 28 real estate projects launched so far this year in Dubai — with scheduled completion dates up until the World Expo 2020. Some of these developments are located in established neighbourhoods, while others are being developed in newer, more outlying locations. Certainly, some investors in these locations will hope to benefit from lower off-plan prices and attractive payment plans, in the hope that values will rise after completion and handover.

What about already established areas of Dubai? Our research found that some locations are expected to take advantage from new infrastructure, retail  developments, tourist attractions as well as leisure developments by 2020 and beyond.

Dubai Sports City, Jumeirah Village and International Media and Production Zone will soon benefit from a major retail mall opening, the first phase of Al Futtaim’s City Centre Me’aisem, which offers a hypermarket, restaurants, family entertainment centre and 60 international outlets. As this mall opens this year, and further expands, surrounding areas could enjoy improved capital and lease values and stronger rental absorption rates, as a result of improved local retail facilities.

Within five years, Discovery Gardens, Al Furjan, Green Community and Jumeirah olf Estates are expected to benefit from the new Metro expansion plan that was recently announced by the Roads and Transport Authority (RTA). When completed, his could potentially add a price premium to sales and rentals of buildings within -10 minute walking distance.

Moving towards the coast, we find the well-established Jumeirah Beach Residence (JBR) is now further enhanced with the opening of the Dubai Tram and The Beach commercial development by Meraas. Additionally, work is under way on the nearby Blue Water project, a new mixed-use manmade island development that will have the world’s largest observation Ferris wheel, similar to the London Eye, only larger. This attraction is aimed at becoming a significant magnet for tourists and residents alike. These improvements could all translate into a potential uplift in capital and rental values in the area, with a possible ripple effect beyond JBR towards the neighbouring Dubai Marina.

Tecom is another area that potentially offers a strong upside due to its location on the main artery and the D61 connecter, as well as having Metro links, close proximity to Dubai Internet City, Dubai Media City, Knowledge Village and many hotels and grade A office space. While opportunities for single-unit purchases in Tecom are limited, investors will have noted that the future of this freehold area could be further boosted by the arrival of the nearby Mall of World, which will start construction soon.

Business Bay, close to Downtown Dubai and Dubai International Financial Centre, is going through a major transformation. The Dubai Water Canal extension, now 33 per cent complete, will soon link the existing Business Bay Creek towards the sea, transforming the area from a business-centric location to a major maritime-style development similar to Dubai Marina, encouraging new waterfront retail development.

Boost in rents

Once the canal is completed, apartment units could enjoy a boost in capital values as well as rents, particularly secondary units that are not within walking distance of Downtown Dubai or don’t already enjoy views of the Burj Khalifa. This is in addition to the considerable uplift that Business Bay has enjoyed since 2012, much as a result of the exceptional market dynamics in adjoining Downtown Dubai.

The first quarter ValuStrat Price Index indicated that residential values were broadly back to the start of 2014, displaying a maturing market price correction within a span of one year, with transaction prices broadly stabilising. Going forward, in a calmer property market investors could find that research is key to identifying new upand-coming locations that could provide future returnsand opportunities for successful investment.

Source: Property Weekly


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