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The world at large maybe heading for another recession. But Andrew Covill, Director of Henry Wiltshire Estate & Leasing Agency, believes the Abu Dhabi property market is in the middle of a period of extraordinary opportunity and growth within the region.
Advantages of investing in Abu Dhabi
Abu Dhabi, as a whole, is good for capital growth due to the restricted supply of properties available for purchase. If we consider the areas where properties are available for all nationalities to buy, these are limited to Al Raha Beach, Reem Island, Al Reef Villas, Hydra Village, Saadiyat Island, Yas Island and Al Ghadeer. A well-located property in any of these locations should do well in terms of growth due to the limited availability in terms of numbers. Any other factors that further generate interest in terms of resale or rental demand potentially increase growth. These include a good sea view or golf course frontage, or a high-floor flat with a good view, or a large corner villa that has no neighbours behind it.
My two top picks would be a marina-fronting apartment in Al Bandar and a well-located villa on the golf course on Saadiyat Island, if budget allows.
Al Bandar is a low-rise, low-density development set around a marina with high quality fixtures and fittings and top class leisure, retail and food and beverage outlets. It is the flagship development within Al Raha Beach where there is strong demand for both purchase and rent, which keeps investment yields high and in turn strengthens price growth. The best apartments in Al Bandar look directly over the marina with no roads or footpaths below, just pure water frontage which will always be a limited commodity.
Regarding Saadiyat Island, it is a simple rationale. It is the only luxury villa community currently completed in Abu Dhabi. However, there are more factors such as a championship golf club, beachfront hotel resorts, a cultural district with world-class museums and much more in the future.
Managing your portfolio
Buy the best property you can within your budget. We all have different budgets and requirements, but always try to consider something that appeals to others in terms of rent or resale. One day, you will re-sell the property, so make sure it has benefits which make it stand apart from others. If you wish to rent it out, ensure it appeals to tenants and attracts a rent which provides a good investment yield.
If you are looking to purchase multiple properties, I always recommend having a balanced portfolio. This means not having ''all your eggs in one basket,'' as the phrase goes. Applying this to properties, if you have different investments in different buildings, areas and price ranges, you are not overexposed to one sector of the market or one community, should there be any negative factors in the future.
Also, a one-bedroom apartment will typically have a higher yield than a three-bedroom unit, but a three-bedroom may exceed it in capital growth due to the higher purchase price and often better location of premium properties within a development.
Owning a mixture means that yields and capital growth should complement each other within the portfolio.
Effects of impending recession
Even if progress in some areas is a little slower than once planned, the plans for the UAE are huge. Within Abu Dhabi, there is expansion and employment in many areas like airlines, airport, infrastructure projects, investment companies, leisure and tourism, among others. As mentioned earlier, the supply is a lot less than many people expect and this holds yields high.
Pros and cons of joint properties
The advantage of purchasing with a friend is that you can pool your resources and afford a larger or more desirable property.
The potential disadvantage is, if you have a disagreement, it can be extremely problematic.
Disagreements between friends over money can be complicated and could be the result of discussion over when to sell the property, how to rent it out, how much to reinvest or when to repair it.
Think carefully and have a written investment plan that you both sign up to.
Marked improvement (Asteco Abu Dhabi Q2 2015 Report)
• Following a major decline in rental rates post financial crisis, from early 2009 onwards, the Abu Dhabi residential market witnessed an improvement since mid-2012 as apartment and villa rental rates increased by an average of 18% and 9%, respectively, up to the end of Q2 2015.
• Apartment sales prices recorded a quicker recovery. The achieved sales rates recorded a 25% increase compared with their lowest point in Q2 2010 whilst villa sales rates increased by more than 30% since Q2 2012.
Source: Zenifer Khaleel, Special to Freehold