Property Weekly: Get off the beaten track

PWThe modest skyline along Ras Al Khaimah’s creek lights up at night. Demand for property l Shutterstock

With so much attention paid to Dubai and Abu Dhabi, the property markets of the other emirates are normally overlooked by renters or homebuyers, except the decidedly price-conscious ones. This is partly unjustified as the savings potential is big, the quality of property is improving and the opportunity costs of a longer commute are increasingly being offset by better infrastructure and connectivity.

In the past, average lease rates in Sharjah used to be around 50 per cent lower than similar properties in Dubai, and even 60 per cent more affordable in Ajman, let alone in the more distant emirates of Umm Al Quwain and Ras Al Khaimah. Fujairah remains an exception.

Of course, where residents pitch their tent depends largely on personal circumstances. Those with jobs in Dubai or Abu Dhabi will think twice about the hassle of a longer daily commute, but others with more flexible work hours can easily benefit from lower real estate prices outside the two UAE metropolises. Some firms have even decided to set up shop outside Dubai, such as Strohal Legal Group, an Austrian law firm that was incorporated as a legal consultancy in Ras Al Khaimah in 2005, to take advantage of the cost benefits. Dr Theodor Strohal, Senior Partner at Strohal, which has clients in the GCC, Iran, Singapore and Myanmar, says apart from lower property prices foreign investors have been driven to Ras Al Khaimah because of fewer restrictions on property purchase.

However, that is not always the case. For example, Sharjah loses out to Dubai in terms of transparency as concerns about a general lack of regulatory clarity on property remains a major issue for property investors. Timing is also important for striking a good deal.

The northern emirates’ real estate market, particularly Sharjah and Ajman, have a strong interdependent relationship with Dubai due to both overflow demand and supply, and tenant migration. When rental and house prices in Dubai go up, demand in the northern emirates strengthens. The demand up north peaked in the first quarter of 2014 when many residents were priced out in Dubai, but the current property price slowdown has effectively put the brakes on outward tenant migration.

“Market activity in Sharjah is historically interlinked with Dubai, with the two emirates in such close proximity that the ebb and flow of residents between them usually follows the rental market highs and lows in Dubai,” says John Stevens, Managing Director of Asteco.

An Asteco report in February showed that rental rates in Sharjah and Ras Al Khaimah declined by 2 per cent. Rents were flat in Ajman and grew slightly in Fujairah and Umm Al Quwain.

In the midterm, demand should be driven by improving connectivity and new tourism developments, namely Al Noor Island and Al Majaz Waterfront in Sharjah, the Pacific Beachfront development on Marjan Island and the expansion of the Mina Al Arab in Ras Al Khaimah, and Ajman’s Al Zorah, which will add a golf course and a new five-star hotel this year.

“With heavy investment in infrastructure development and a growing quality-focused residential offering, we are seeing a slow shift towards a more stable environment as investors and tenants consider the quality of life outside of Dubai,” says Stevens.

Umm Al Quwain is observing a jump in the number of construction projects and upgrade of roads to the popular residential areas of Al Salama and Al Ramla. There is also strong residential growth due to increased investment in free zone, which has become popular for companies and investors from the Indian subcontinent, Commonwealth of Independent States countries, the UK and France, according to Shaikh Khalid Bin Rashid Al Mualla, Chairman of Umm Al Quwain’s Ports Customs and Free Zone Corporation.

Umm Al Quwain also has the lowest rents in the UAE, with prices for two-bedroom apartments going as low as Dh25,000 a year, compared with Dh35,000 in Ajman and from Dh40,000 in Sharjah. In Dubai, two-bedroom apartments are rarely advertised below Dh100,000, apart from a few budget deals. In Umm Al Quwain, Dh100,000 can already get you a standalone three-bedroom villa with garden and pool.

Fujairah is an exemption. The easternmost emirate is known for its real estate scene being out of sync with the rest of the UAE. The lack of residential units and the current economic upswing are pushing property prices up, making the emirate immune to prevailing trends in the other northern emirates. Two-bedroom apartments in upscale buildings such as Al Rostamani Residences of Al Jaber Tower can be rented out for over Dh50,000 a year.

Due to its unique geographical location on the coast of the Gulf of Oman, its bustling port, continuing developmental and tourism projects and the new job opportunities, rents and home prices are expected to sustain their steady increase.

The same applies to Khor Fakkan, the second largest city on the UAE’s east coast. Khor Fakkan belongs to the emirate of Sharjah, but is geographically surrounded by the emirate of Fujairah. While it has been off the beaten track for UAE residents and visitors in the past and its property market mainly caters to locals and expats working at Khor Fakkan Container Terminal, the only natural deep-sea port in the region and one of the major container ports of the UAE, and a huge desalination plant nearby, tourism developers are promoting the city’s picturesque mountain ranges, tranquil beaches and moderate climate.

These conditions are also attracting Emiratis who are renting or buying villas on the east coast as summer domiciles. A four-bedroom villa, depending on location and views, rents out for at least Dh120,000.

The large new and exclusive Al Dana Island project in Fujairah’s northern coastal region of Dibba is another draw for property buyers. The 158,000-sq-m development is on one of the largest man-made islands in the UAE and features almost 400 luxury villas set in a landscaped environment, complimented by a yacht club and a five-star hotel. Prices start at around Dh2 million.

“Al Dana Island is a unique development, benefiting from the beauty of the natural environment,” says Wiaam Mahmoud Rabah, Chairman of Green Valley International Real Estate, which is developing the project. “It’s the first of its kind to combine a view of both the mountains and the sea at the same time and, as such, will offer residents something which cannot be found anywhere else.”

Although not part of the northern emirates, the garden city of Al Ain, the second largest city in Abu Dhabi and the fourth largest in the UAE, is another interesting location for buying property. Popular with Emiratis, property prices are not particularly low, but the city’s beautiful scenery is a draw for many.

Villas or detached houses in a compound with courtyard and garden are popular with both locals and expats, particularly four-bedroom homes with prices starting from Dh120,000 per year. Rents for apartments in Al Ain, mostly in low-rise buildings, are from Dh40,000 for a one-bedder to Dh70,000 for a two-bedder. The most popular areas are Town Centre, Al Jimi and Al Maqam.

Prices have been stable since a hike in 2013 after the UAE ended cross-border commuting for expats working in Al Ain who used to live in the cheaper residential area of neighbouring Al Buraimi, Oman. In the midterm, price developments of property in the Northern Emirates and Al Ain could be influenced by one of the biggest infrastructure projects in the UAE, Etihad Rail.

The Dh40-billion railway network, which will provide both freight and passenger services when completed, will eventually link Saudi Arabia through Ghweifat in the western border, Oman through Al Ain in the east and at a later stage expand to Umm Al Quwain, Ras Al Khaimah and Fujairah. The railway connection is expected to drive housing prices, although the 2018 planned completion of the project could face delays due to the slump in oil prices and subsequent funding difficulties.

Source: Arno Maierbrugger, Special to Property WeeklyPW


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