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Question of the Week
What are the pros and cons of buying property outside Dubai or Abu Dhabi?
The pros and cons are fairly straightforward.
Obviously, potential investors need to consider their lifestyle and what kind of facilities, features or benefits they want to have access to.
For example, if you are a frequent business traveller, then you may well need to buy somewhere with convenient access to the nearest international airport.
The advantages of buying outside Dubai and Abu Dhabi include affordability (more square footage for your money), lower living costs, and a quieter or less frenetic environment.
The disadvantages of choosing to buy in another emirate could include poor or underdeveloped infrastructure, the need to factor in additional commuting time if working in another emirate, less services and amenities on your doorstep compared to other cities, and different/unclear real estate legislation/owner protection in less-established markets.
So far, Ras Al Khaimah has proven to be the best alternative, with many residents choosing to buy water/beachfront villas and apartments at a fraction of the price in Dubai.
For those commuting only a couple of days a week, the option seems attractive, especially as retail, quality hotels and other supporting facilities are available in the emirate.
A home may appear to be affordable when you look at a real estate listing, but what are some of the hidden costs that you should be aware of?
A checklist of the potential hidden costs could include other fees relating to the purchase – amount of the deposit (30 per cent upfront payment required), house insurance, 4 per cent Dubai Land Department transfer fee and other miscellaneous charges.
There are other associated costs that come along with purchasing a new home such as utility bills (DEWA, internet, phone), house set-up costs, fixtures and furnishings, among others.
In addition, the service charge for the general upkeep of the common areas is to be paid annually and can come in at a high cost, depending on the property’s location.
Buyers should enquire about the charges before buying as these can add up to a significant amount.
Where can we find the best bargains in properties?
Looking at the affordable bracket, there are projects that can be considered “bargains” for those seeking to get their foot on the real estate investment ladder or add to an existing portfolio. In Dubai, there are studio and one-bedroom units in Jumeirah Village, Dubai Sports City, International Media Production Zone (IMPZ) and Dubailand. Newly launched projects that can also be considered within this bracket are Reef Residence in Jumeirah Village Circle, Midtown by Deyaar in IMPZ, Town Square on Al Qudra Road and Glitz at Dubai Studio City. In Abu Dhabi, there is Hydra Avenue on Reem Island, Al Ghadeer in the mainland and Ansam on Yas Island. All have units for sale under the Dh1 million threshold. Al Reef Tower has one-bedroom units for Dh900,000. In Ras Al Khaimah, Al Hamra Village’s Marina Apartments units come at under Dh500,000 and Royal Breeze studios at Dh300,000.
We read about affordability a lot in the press. What is considered “affordable” in the UAE?
The global definition that qualifies housing as “affordable” is that it should not represent more than 30 to 35 per cent of a household’s annual expenditure. If we are looking at affordability for the lower mid-income segment of Dubai’s population, for example, the maximum total rental allocation per annum should range from Dh40,000 to Dh110,000. If this were translated into property ownership, an affordable sales price would start from around Dh250,000 and be capped at under Dh1 million. In this case, there is a limited number of truly affordable projects in the UAE with the price relating predominantly to studio and one-bedroom units in areas such as Jumeirah Village, Dubai Sports City, International Media Production Zone and Dubailand. Although these homes fall into the “affordable” bracket, they are offered on an off-plan basis, which means the buyer needs to finance the property while paying for his current accommodation.
What can we expect in terms of pricing this year?
In 2015, we saw overall stability across the real estate market and only a modest decline in residential rental rates due to the release of new units.
With more units set to be released this year, more pressure can be expected and this is a major consideration for those looking for buy-to-let opportunities.
However, for those looking to purchase, it could be advantageous, although existing owners keen to sell may be forced to hang on to their investments or simply refuse to bow to market pressure. Therefore, we could see fewer transactions in the secondary market.
Affordability will once again be the mantra for this year and the main purchase driver, especially in desirable but high-priced developments such as Dubai Marina (including Jumeirah Beach Residence).
Source: John Stevens, Special to Properties
Managing Director, Asteco