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- I am looking at investing in a flat in Dubai for the long term. Can you advise me on the factors I should be concerned with?
As always, we must be thinking location, quality of the building and the completion status and quality of infrastructure and building amenities.
Anything which is close to the beach (especially with a sea view), a golf course view or situated somewhere close to downtown is a good place to start. If you can also have close access to metro, even better. You will virtually be assured of renting your new property relatively easily at a rate which will provide a tax-free ROI of at least 5% net. These locations are more likely to provide superior appreciation in capital value as well.
You also need to consider the effectiveness of the owners association (OA), service charges and the quality of maintenance services. Facility management is becoming increasingly important to determining the value of buildings as it will have an effect on the long-term value of your investment.
- With a lot of new developments being offered, what do you think about buying off-plan vs. completed properties?
By buying off-plan, you can benefit from capital appreciation exceeding the market average in the period just prior to launch, and over the ensuing 12 months. However, remember that in purchasing a completed property, you will benefit from the cash flow immediately providing you with an immediate yield on your investment.
To help estimate which option will work best for you, seek the advice of a reputable real estate professional. They should be able to help you define your investment objectives, identify suitable investments and conduct a complete financial analysis.
Look for certain property types which you believe will be keenly sought in the future, and buy properties from developers who have a strong and stable track record.
- Do you think that there are too many new projects being introduced too soon?
There have been projects unveiled with an estimated value of at least US$40 billion in the recent past. They include the world's biggest Ferris wheel, a new ''city within a city,'' and a range of theme parks.
These types of developments are a little different to the random, unfettered developments of the pre-recession era in that they are tapping into what actually drives Dubai's economic growth.
One reason why the economy is growing at a very healthy rate is because of a booming tourism industry. If you add to that a location which is one of the best cities for young professionals globally, you'll see why investment in developing, and expanding an economic capability to satisfy a growing demand for tourism and entertainment makes sense.
It is ideal for the real estate industry to grow as a result of population growth driven by economic development. Many of the newly-announced projects are aimed at doing just that.
- With the recent uptick in prices, is real estate still providing real value?
Definitely. Remember, regardless of where the capital comes from, the market ultimately determines a broadly representative perception of value, and we believe that there is some way to go before the Dubai real estate industry is considered overpriced.
Of course, it varies by asset type. For example, the reason areas such as Emirates Living, The Villa Project, Arabian Ranches and the Palm Jumeirah have been appreciating so strongly is because of the superior value they are providing prospective owner-occupiers and investors to whatever exists elsewhere.
There are different types of buyers driving the demand. The first type is taking the opportunity to upgrade from apartment-style to villa-style living. The second is upgrading villa type, style, size and location, and from a pure investment point of view.
Whether owning or renting, value will always attract interest and activity.
- Question of the Week: There has been a lot written about the new Investor Protection Law. Is it a case of too little too late, and how will people who have been disadvantaged during the financial crisis benefit from its implementation?
In essence, The Real Estate Investor Protection Law is yet another step in the maturation of the Dubai Real Estate industry. We always said that a viable and robust real estate industry requires three important elements which we call the 3Cs: Confidence, Capital and Clarity.
The law will go a long way to boost the level of confidence of investors by protecting them from contract breaches or fraudulent activities by developers, and add clarity as to what legal protection they may draw upon if needed. In addition, it is expected that the legal status owners' associations will be further strengthened. All this is good news for the industry, going forward.
However, the degree to which the law may be applied retrospectively is likely to be limited. Already, those investors who have been disadvantaged by developers cancelling projects can take their case to a special committee set up specifically to handle these matters; while it is still not clear as to whether those investors experiencing delays in projects commenced prior to the new law's introduction will be entitled to relief under its provisions.
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Source: Mohanad Alwadiya, Special to Freehold
The writer is Managing Director - Harbor Real Estate
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