Question: I have a property which I bought off-plan on a 15-year mortgage in 2004. Initially the value increased significantly but has now reduced to the near the price I bought at. My question is, should I sell now before prices dip further or hold onto the property? I am currently paying the mortgage and can afford to continue to do so but I plan to leave the UAE to retire in three years time and do not want a property in negative equity on which the rent fails to cover the mortgage repayments. I was hoping to be able to sell the property or use the rent to supplement retirement funds but I realise I have to rethink this plan.
Answer: The UAE property market is still on shaky ground with industry insiders predicting that prices will continue to fall this year by around 10 per cent as a result of ongoing oversupply and lack of confidence in the market, which is deterring potential investors.
However, in a bid to boost investor confidence the UAE government announced two weeks ago that it plans to extend the real estate investor's visa from six months to three years. The government hopes the move will drive foreign investment in the UAE's real estate sector and so revive it. At present, though, there is no detail on how the new visa regulations will work and there's also industry uncertainty about how much of an impact the move will have, especially in the short-term.
In your case it may give you confidence that the UAE government is making moves to revive the real estate sector, which in the longer term should see the value of your property rise again. It may also mean that you and your family will be able to live in the UAE even after you retire — if that's something you wish to do then it may be worth holding on to your property.
Lost chance
If you decide to sell now, then you will walk away with little or no profit but will keep yourself out of falling into negative equity and the stress that goes with that situation. However, you will also have lost the chance to make any return on your investment and to generate any future income through rental.
At this point it would be wise to reassess you financial plans for the future as this may help assist you in making the correct decision. If you are retiring in three years time and are hoping to use the profits or rental income from your property to live off then it is clear you will have to re-think this plan. You do not say what your age is but the situation may mean that you need to continue to work for a few more years to ensure you have enough money to retire comfortably.
An independent financial adviser can advise you on restructuring your pension plan to incorporate a longer working period. If you decide to continue to work then you may decide to keep your property and try to pay off the mortgage in as short a period of time as possible, so reducing the overall repayment sum.
Doing this will put you in a better position to cash in on your property once the value rises again, or if you decide to keep the property and rent it out, then you will be able to enjoy the extra income.
The writer is Business Services Director, Nexus Group. The opinions expressed here are the writer's own and do not necessarily reflect those of Gulf News.
