Business | Property
The era of the long-term investor
When the world faces economic strife, the instinctive reaction is to go into financial lockdown. Some investors may have had their fingers burned; others persuaded by bleak headlines that their hard-earned cash is best kept securely under the mattress.
- By Ryan Mohoney, Special to Gulf News
- Published: 23:51 January 15, 2009
When the world faces economic strife, the instinctive reaction is to go into financial lockdown. Some investors may have had their fingers burned; others persuaded by bleak headlines that their hard-earned cash is best kept securely under the mattress.
But this latest development of the financial market is simply another stage in the great, global, economic cycle. The bad times, like the booms will pass and it is a mistake to run for the hills because, for those who are placed to take advantage of it, there are some great opportunities out there.
Property has long been considered one of the best and most secure forms of investment, and that sage advice still rings true.
Speculators who relied on the quick-flip market to make a fast buck lost faith in property as the global slow-down took hold; but the market is still there, the same principles still apply and there are still worthwhile returns to be had.
Surely no-one believed that a boom like the one we have seen in the emirates could continue unchecked? All that is happening is that the market is consolidating and from now on will progress at a more sustainable pace.
What must be considered is that the property market in the UAE right now is a very different animal to that of the last five years.
The returns on expenditure may not come so thick and fast, granted, but for the astute and patient buyer, the new era of long-term investment can generate very satisfying revenue.
Property prices across the UAE will continue to fall and eventually bottom out in 2009 with prices at around ten times the rental value; from that point on for those with the cash and the foresight, bricks and mortar will increasingly present a tempting longer-term prospect.
Once bottomed out prices are expected to slowly rise, by 10-15 per cent per year over the next three years and investors will begin to reap the benefits.
In that respect property must be seen as a far better, and more secure, long-term investment than term deposits, bonds or other security investments, and is infinitely preferable to the money-under-the-mattress approach.
The rental market, while slower than in previous years, is still strong and though prices are expected to soften in the first two quarters of 2009, yields in the UAE, and in Abu Dhabi in particular where readily-available units are still scarce, are predicted to be higher than in many international markets.
So while investors are right to be cautious, burying your head, and your money, in the sand is the wrong move. True investors will realise the nature of the game has changed and play to the different rules accordingly.
You can still win, but you must look a little further down the line for final whistle.
Ryan Mahoney is Managing Director of Dubai-based Better Homes LLC.
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