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Question of the Week
What are the key trends to watch out for that will affect the UAE property scene this year?
According to the Dubai Land Department’s (DLD) annual report for 2015, the total amount of real estate transactions recorded in the emirate last year exceeded Dh267 billion through 63,719 transactions, showing an 8 per cent increase compared to last year, and that sales acquired 49 per cent of the total. The report reveals that sales crossed 48,000 transactions with a total value of Dh130 billion, while mortgages crossed 12,000 with a total value of Dh117 billion. Sales and mortgages relating to land transactions recorded more than Dh194 billion from the total real estate figures for 2015, with a total of 16,751 transactions.
The Dubai realty sector looks solid. Taking into account the continuous growth of the city and its number of residents, it is typical for the supply versus demand to fluctuate. The next stage of growth for the Dubai property market will be led by two key factors: affordable housing and rising population that keeps the demand high.
The shift to affordable homes will help address the needs of a large cross-section of middle-income professionals. Investors will focus more on affordable housing in fully established and secure communities with a range of facilities and amenities. The demand is growing and supply has yet to catch up. So, the prices will continue to hold strong and increase for developments that are “aspirational” addresses.
Being an investor from India, why should I invest in the Dubai property market today?
Dubai’s fundamentals are very strong and its lifestyle offerings make it a magnet for international tourists and residents. Various projects will further strengthen the diversification of its economy and help ignite another real estate revival leading to the Expo 2020. Dubai is a home away from home for Indians, the city’s top property investor, who invest in the city because of its proximity to India, lower interest rates, lucrative rental yields, security, tax-free returns on investment, attractive payment plans and more. Rates in many locations are lower compared to other cities. The average ticket size for prime locations in Dubai, including Dubai Marina, Business Bay and Downtown Dubai, is approximately Dh2 to 4 million, equal to INR33.5 to 66.9 million. The same ticket size in a prime location in India costs INR50 to 100 million.
What are the benefits of investing in the affordable home segment?
Affordable housing is something that we’ve seen kick off in the past 12 to 18 months, with low-entry price points. The shift to affordable homes is a key priority for developers. Property prices coming to a more realistic level and becoming attractive to the end-users increase the possibility of a large-scale migration to home ownership from rental homes. The UAE currently has a population of over 9 million, expected to reach over 10 million in 2020. To accommodate nearly a million people, an estimated 125,000 apartments will be required in the next five years. As per the current market trend, there will be an expected delivery of only 75,000 apartments in the next five years, resulting in increasing rents and prices. Dubai’s property prices are still lower compared to global hub cities. The new low-price environment offers an opportunity for consumers to benefit not only from the asset but also from price appreciation.
Being a foreign investor, can I buy a property anywhere in Dubai? What is the difference between freehold and leasehold?
Dubai is the first emirate in the UAE to open its doors to property ownership by citizens of other countries beyond the GCC region. The two forms of legal property ownership for expats in Dubai are leasehold and freehold.
Leasehold means a property can be taken on lease for a period of 99 years irrespective of the lessee’s nationality. Technically, it is buying the right to live in or occupy the property for a long period, with which the lessee pays ground rent to the landowner or landlord within the duration of the contract. The ownership of the property, however, will revert back to the landlord at the end of the lease. If leaseholders don’t fulfil the terms of the lease, the lease can be forfeited. Freehold means taking absolute ownership of the property including its structure and the land it stands on. There are many freehold properties in Dubai; it is always the preferred option of many.
My friends are advising me to invest in off-plan property. What are the advantages of buying one?
There are several advantages of buying off-plan properties. They feature flexible payment plans without charging interest. You can make a deposit at the time of purchase and pay the balance as installments once construction is completed. You also do not expose your capital upfront as you follow a payment plan. If you invest in the right project, your capital gain will be higher annually compared to ready properties. Some developers even offer projects with attractive post-handover payment plans. Banks also provide support. Moreover, you are locked in at a price, allowing you to achieve capital appreciation by the time it is finished. A brand new house does not immediately require maintenance as opposed to a ready property that has been sitting in the market for years. In addition, investing in such projects will provide you with the most power-saving appliances in the market as the houses are usually fitted with the latest technology.
Source: Sunny Tyagi, Special to Properties
Client Manager, SPF Realty