Golden opportunity
Why talk down Dubai? More than ever the City of Gold can be considered an investor’s market, says Andre Cooray
‘‘Now might be the time to haggle your heart out and get a chic home for cheap at one of the glitziest locations on the planet’’
Famous for putting sexy real estate back on the map through spectacular projects such as Palm Jumeirah (three palm-tree-shaped man-made islands off the coast), Dubai has become easy prey for smart swooping property vultures amid the economic slowdown. Rental yields are soldiering on nicely, so a long-term investment in this popular tourist destination is a great idea, especially because the Dubai market is here to stay. Now might be the time to haggle your heart out and get a chic home for cheap at one of the glitziest locations on the planet.
“Despite the economic turndown there is still a lot of activity in Dubai, especially in the rentals market. We are still seeing lots of western expatriates relocating here. We work closely with large multinational firms, such as Clifford Chance, who are still bringing over employees to the UAE. In the sales market there is activity in the end-user market. Especially in the villa communities and apartments in key locations,” says Claire Collier the manager of In:Style Real Estate in Dubai.
Collier believes that now is definitely a great time for investors to buy because there are a lot of distressed sales around, and good deals on offer. She notes that there is a strong show of presence from Hong Kong investors and predicts that Dubai, due to its buoyant market and high rental yields, will soon attract more Hong Kong homebuyers than London which was traditionally more popular.
The current Dubai hotspots, if you are looking for an apartment to rent out, are Dubai Marina, Palm Jumeirah, Jumeirah Beach Residence and downtown Burj Dubai. In addition, villa communities such as Emirates Living and Arabian Ranches are a great place to invest, due to the prospect of good returns. The infrastructure in these resort districts is already in place, and they have entertainment and leisure facilities laid on. This is where wealthy expats and locals live, and therefore, these are the locations that attract professionals coming into Dubai looking to rent homes, Collier says.
At Jumeirah Beach Residence, you can pick up a three-bedroom, 900 square-foot apartment with a sea view for around HK$4.6 million. A two-bedroom, 1,350 square-foot apartment with a partial sea view, in the same development, is priced at HK$3.4 million, while a 970 square-foot unit with one bedroom is selling for HK$2.5 million.
“The Dubai market is transcending into a mature market as we speak. Investors were enjoying 15 percent to 25 percent yields historically, now we are seeing more like 6 percent to 10 percent. This is still better than most major cities. Even the manner by which a rental is being conducted has changed and become more in line with the UK,” says Collier.
Potential investors are advised to avoid buying anything off plan, and to be wary of homes selling for less than they were bought, as there is no immediate return on these units, or resale value. Collier also warns investors not to put their money into delayed projects that may never come to fruition. In other words, do your homework to take advantage of the prices on offer, and stay away from relatively unknown developers. If a bargain seems too good to be true it probably is.
Stick to prime areas, and appealing properties, Collier adds. Dubai has seen huge expansion over the past few years and there is a proliferation of ‘mass-produced’ apartment blocks, often in dead areas, that have been put up quickly without any thought to style or tenants’ comfort. Units such as these, Collier notes, will be hard to let or sell and will have a high tenant turnaround.
That said, if you have a poker face, Dubai is a good bet at the moment and there are numerous opportunities available. Sellers are fully aware that the market has changed and demand is no longer as high as it was. What’s more, over-stretched investors are looking to off-load property and almost everyone is cautious with their cash. As a result, home sellers are open to demands, flexible about price and willing to negotiate.
“Following the global crisis, real-estate prices have been affected. This has created some very interesting opportunities for investors seeking to enter the market. Rental prices haven’t dropped and therefore investors can expect high rental yields. Dubai offers a tax-free environment, combined with a luxurious lifestyle with some great career opportunities that will continue to attract an expat community, not to mention its tourism. One should look at Dubai’s real estate as a long-term investment opposed to speculation as many investors did in the past three years,” says Michael Lahyani, chief executive officer and managing director of www.squarefoot.com.hk’s Dubai-based sister company www.propertyfinder.ae.
Since January 2009, villa homes on the Jumeirah Islands and Jumeirah Park developments have been selling at reduced prices: some down as much as 45 percent. The Dubai Land Department forecast in March this year that property prices in Dubai will continue to fall at an average of 20 percent. Analysts expect prices to hit rock bottom in the summer, and to stabilise in the third quarter. The market is expected to show signs of recovery in late 2009 or early 2010.
Currently, rental property in Dubai is still in high demand due to a steady influx of expats, fewer investors acquiring property to let out, and the lack of new supply. This intensifying pressure on the leasing market could well translate into lucrative returns for investors who get in quick and snap up quality units in the right location for below market price.
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