Dubai Property Boom

As a property investor, it is important to see what added benefit will your buyer receive when purchasing on your offer to ensure quick resale. There are many factors that buyers look into, and most of them even prioritise these differently. When searching for a property, buyers often give a lot of consideration to extended payment plans over per square foot rates. as many have multiple committments and minimizing load on their cashflow gives a sense of comfort to many.

Moving on with our recent article on generating higher returns on minimum investments, there are some excellent projects to consider investing into.

Schon Business Park is one of these. The payment plans offered by them are on 25% down, 25% after 1 year, and the balance 50% on handover. The location at Dubai investment park is ideal, close to the new airport and most of the surrounding infrastructure is almost ready. Schon Business Park is a leasehold property with a term of 60 years. Schon properties is a renowed developer and has successfuly delivered the famouns Dubai Lagoon.

Then there’s the upcoming Regent Business Park which is still under pre-launch. Located also in Dubai Investment Park, this project offers a 15% on booking, 15% after 1 year, and the remaining 70% on completion. The rates during launch (around mid Feb) are expected to be around 1100 per square foot. This property offers a 90 year lease term. With a 15% downpayment and nothing to pay until 1 year, you can easily expect a sound appreciation per square foot before your next installment. The project is being developed by RERA approved developer Aristrocrat Star Investments. We have some excellent properties available here for those who are interested can get in touch on info@dubaipropertyboom.com

Then theres also the Sanali Tower which had recently been launched over full page ads on local newspapers. Sanali tower gives investors a 30% downpayment and balance 70% on completion or over 10 years financed inhouse from the developer themselves. Sanali Business Towers are a group of three towers located on Emirates road close to the Mall of Arabia and Al Barari.

Abu Dhabi hasn’t been far behind with their offers on properties. Long Coast real estate offers commercial offices in Abu Dhabi, project name Creek Towers. This project has residential and commercial spaces on offer at an unbeatable 15% downpayment, and balance 85% on handover. The building is located in Reem Island.

 Projects such as these maximize investor returns, minimize speculation risk, and also give an added advantage to buyers when purchasing at a premium, as they only have to pay the initial downpayment + premium and nothing until completion. There are several such projects available and launching regularly. Those interested can register their interest with contact information on info@dubaipropertyboom.com to receive updates on the same. 

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When booking your dream apartment, villa, or that Burj view office in Dubai, do remember to evaluate the per squarefoot price on purchase.

Net or Gross?
Every developer has their own pricing strategy. While some developers put a price per squarefoot on the total net area, others charge it on gross. Always reconfirm this with your agent before you sign the cheque. In most cases, if the property is being purchased on a premium, the first page of the contract will clearly mention the total area (and if it is net or gross). If the property is purchased directly from the developer its best to ask them.

So what difference does that make?
Gross Area in simple terms is  the total useable and unuseable floor area, usually measured from the outside walls, and may include columns, stairwells (if multistoried), and other utilities.

The Net Area is strictly the carpet or useable floor area only. It is measured from the inside of enclosed walls, therefore excludes spaces occupied by walls and partitions.

So how does that affect pricing?
Usually prices quoted relative to gross area may appear numerically lower, but could actually cost more as compared to similar pricing on net area.

Example, in one hypothetical situation, a property of 1000 sq.ft. gross area could approximate a net area close to 850sq.f.t.  Therefore a 1000sq.ft. (gross) sized property at rate of AED 1,300 per square foot would actually be more costlier to a property of 1000sq.ft. (net) at AED 1,300 per square foot as the first option will leave you with a lower net area size when compared to the second option.

Compare options

It’s important to compare options and developer pricing strategies in surrounding projects and locations to evaluate you get maximum area on your investment.

On investment or personal use?

This is important as investors who plan to resell, as buyers will often check pricing on square foot against the gross and net area.

For personal use, its crucial to know what will be the actual carpet or useable area you will enjoy on your property as the gross to net ratio often varies across different developers and properties within the same vicinity, even more across international borders.

Everyone likes a deal where you have to pay the least possible amount, and simultaneously cover more area to maximize return. There are several projects that are offered with low down payments to investors to purchase off plan, and leave further installments until the property is handed over. This not only gives a comfortable cash flow to the buyer, but also the confidence to book a property without the stress of continuous outflows over the development period.

A perfect example of this most recently was Ivory Tower in IMPZ. The apartments were launched with excellent payment plans starting at 15% down and balance on handover. The project got sold out in 2 weeks and is already commanding a premium only on the basis of its payment plan.

Some popular payment plan stars are the First Gulf Bank projects and The Skyscraper in Business Bay which may not be as convenient as Ivory tower, but give the buyer 6 month wide payment intervals.

Jumeirah Village South too has recently seen its share of properties available at 30% down and 70% on handover.

Developers are offering a range of suitable payment plans (apart from bank financing) to attract investors. These are excellent opportunities for long term investors who seek to build a sound asset portfolio without worrying about heavy down payments. Several developers even offer extended installments with in-house financing on completion of the property.

On the other hand, a limited down payment over the period of construction is the best deal for those looking to flip properties at quick premiums. This was a famous one during early 2007 when Deyaar launched towers one after another at 10% down payment and a 1 year holiday until the next installment.

With new projects being launched in Dubai almost every day, keep your eyes open for that perfect deal and you’re sure to find something that suits your pocket, timeframe, and peace of mind.

Dubai property market is now regulated by RERA (Real Estate Regulatory Authority). RERA had recently released a issued its first list of approximately 396 developers in the UAE that it recognizes as licensed to develop and sell properties within the country.

RERA has expressed investors to be cautious when purchasing properties from developers that are not listed with RERA. This has been an excellent step forward to boost investor confidence in the region.

The new Escrow Law 8 protects your investment by implementing a trust account between the property purchaser and the developer and is closely monitored by the Dubai Land Department to ensure developers comply with government imposed guidelines.

RERA has also issued a Memorandum of Understanding form for buyers, sellers, and agents to complete in reference to property transfers. When buying or selling a property, do ask your agent for the standard MOU prepared by RERA over signing any private transfer agreements.

Dubai Investment Park is a leasehold location. Currently residential properties are sold at a 99 year lease, and commercial 60 years. Both of which are claimed to be renewable.

Dubai Investment Park also houses the famous residential development at the Green Community know for its beautiful bungalows, Dubai Lagoons and its famous payment plans, and the Courtyard Marriott Dubai the first hotel fully operational hotel in DIP.

Though the leasehold idea initially disappoints most investors in this city packed with unlimited freehold options, the location still holds excellent potential, and should not be a criteria for investors seeking a term return over the next 2 to 5 years..

For one, it is located within a 2 minutes drive from Jebel Ali Free Zone, which is already packed with businesses and waiting lists. Then there’s the new Jebel Ali International Airport. As compared to almost every other location, this one has its infrastructure ready – roads are built, walking paths, clubhouses, fully leased shopping mall, a fully operational 5 star hotel, a couple of occupied residential communities, and neighbor to UAE’s largest and most commercial international airport.

That’s not it; commercial offices are available at bargain rates benchmarked on AED 1,100 per square foot, with sound developers such as Schon Properties offering some superb payment plans. The closest commercial community to this is Downtown Jebel Ali, with rates much above the AED 1,400 per square foot mark.

The above are excellent opportunities that give investors the ability to enter at a low booking rate, flexible payment options without bank financing, and the prospects of high returns over its construction period.

Undervalued commercial properties with magnificent potential

While everyone is almost busy booking returns on top locations as Business Bay and Jumeirah Lakes Towers, the skyrocketing rates are only making room for more alternates. There has been a rapidly growing interest among several buyers for new commercial offerings at Jumeirah Village South and Dubai Investment Park.

Jumeirah Village South. Located in New Dubai and accessible from Emirates Road, Al Khail Road, and Sheikh Zayed Road. Properties are freehold. Majority of the community is under construction with residential buildings, townhouses, and villas by private developers. There have been recent announcements of commercial projects such as Jumeirah Waves Towers, Silver Heights, and a few more. Current units are at a bargain of anywhere between AED 600 – 750 psf with some fab payment plans.

The increasing interest in Jumeirah Village South for its limited commercial availability has attracted the likes of sound development companies and institutional financing approvals. Keep your eye open for several new launches by top developers.

It’s ony likely to result in immediate appreciation on current rates to the benefit of investors who are willing to ride the first mover advantage, with prospects of gradual growth as the community infrastructure develops incourse of time.

Has anyone noticed the availability of villas in the market? There has been a gradually increasing number of villas going on sale at the Arabian Ranches and Springs, most of which in today’s market seem quite a reasonable buy.

The recent launches of several villa projects in Dubai and Abu Dhabi at attractive prices and payment terms has greatly increased choices for the villa buyer. Projects like Al Furjan for example, which has drawn a good amount of attraction due to its proximity to the main areas being much closer than Villas like the Arabian Ranches.

 While Arabian ranches is a beautiful community on its own, most buyers still consider it off their regular route, and when there’s a closer alternative there in almost the same bang for your buck, prices will stabilize. If you are hunting to move into that dream villa of your own, with a private garden, and maybe even a pool this is probably the best time (again) to invest in the Arabian Ranches and the Springs.

Both fantastically landscaped, with some properties that enjoy pretty huge plot sizes for today’s standard, it’s likely to see decent but gradual appreciation in the near future. There’s also some smarty investors who purchase a shell villa, furnish it with the goodies, dig up a fancy jaccuzzi pool, and maybe even partition an extra room or so to fetch that awaited premium.

If you are planning an investment in any of these, I’d highly recommend taking a drive down there will fetch you a list of numbers displayed on walls saying ‘for sale’. This greately increases chances for a direct sale, which could save you the thousands most agents might plug in between. The best part is, they are branded properties, so almost every bank will be more than happy to offer you that 70%+ finance for half of your remaining lifetime.  

These villas also make excellent holiday homes, or holiday rental properites.

There are several locations in Dubai which are currently not identitfied as the “hot spots” but are fast emerging, and could actually turn out to be a best bet for investors.

One of these is the International Media Production Zone in Dubai. This is the new freezone by TECOM located on Emirates Road, just diagonal to Jumeirah Village. The combination of freezone and freehold makes it an attractive investment opportunity. Looking at current freezones such as the Dubai Internet City and Media City, there’s a possible 6 month waiting list for companies wanting to establish there. Besides commercial premises, IMPZ does have residential structures also under development. With over 200 companies already registered in IMPZ at its contsruction state, the demand on completetion is only expected to grow.

Another potential gem is Jumeirah Village. Jumeirah village has some excellent low rise residential buildings and townhouses which currently averaging a price band anywhere between of AED 600-750psf, with some financing plans by the developers themselves asking a minimum down, and extended monthly installments spread over 7-10 years. In comparison to Dubai Marina, Jumeirah Lake Towers, and other residential areas which are priced at AED1000 or more, Jumeirah Village is a much cheaper buy for the price sensitive buyer. Though there isn’t much shortage of availability currently, it is likely to prove a smart investment based on the simpler principles of buy low and sell high, seeing the current plot prices and contractor rates, it hardly gets lower than this.

However most properties in both areas (IMPZ) or Jumeirah Village will require a fair deal of patience to enjoy your investment returns considering the fact that most projects are likely to reach completion only around 2009-10.

The Dubai property market has been a rollercoaster ride over the past few years. This has given property investors room for various speculative perspectives.

Most often, the very first question asked is “is it a good time to buy property in Dubai?” which is usually followed by “last year my friend sold his property for twice the price? Will my property double?” or the suprisingly cliched “Will the bubble burst?”

The answer is = depends. Depends on your investment objective. If your objective is to speculate by purchasing and selling over a short time duration, the market direction is highly significant.

However, if your investment objective is to purchase a residential or commercial property for personal use as a long term investment, then market influences in the short term are irrelevant. In most normal and mature markets property prices in the long run mostly experience an upward trend, unless the nation suffers from a major economic or natural crisis.

As for the short run - sometimes it’s “hot” and sometimes its “cold”, just like any other market.

No one can surely predict which direction the markets will go. The best indications would be a common sense approach to supply vs demand. While current demand for residential property in Dubai is so high with soaring rents and delayed projects, what will happen in the future when all the thousands of apartments are eventually released? Will there be an oversupply (maybe not). What about scarcity of commercial property developments among all the residential launches? Will commercial investments appreciate?

The key is to research, and then research again. Some investors often consider properties located in “upcoming” locations as an indication of a possible future hit, while others play by the old school rules of buy low and sell high.

Seeing the current property scenario in Dubai, the local listings are saturated with supply and several deals including free holidays and cars with every apartment to attract investors. Yet, in comparison with international markets, Dubai real estate is much cheaper for the quality and lifestyle that comes along.

To sum it up, the coming year seems more of a long term investors market seeking long term capital appreciation or lease yeild than a flipping speculator looking for a quick buck.