Attractive buy-to-let options
Attractive buy-to-let options
Opportunities abound in Abu Dhabi for those on the lookout for units with high yields
With the Abu Dhabi property market gathering speed and new releases of property for sale to all nationalities becoming more frequent, experienced investors are looking carefully at their options and those new to the buy-to-let concept are looking at the possibilities.
For those seeking good buy-to-let/investment units with high yields and also those who are looking more to the potential capital growth returns, Abu Dhabi certainly has all the right components:
- High employment supported by mega investments in industry and a healthy, stable economy and political environment - the $2.2 billion (about Dh8.09 billion) Khalifa Port and Industrial Zone development and $3.4 billion (about Dh12.5 billion) investment in industrial clusters is alreadyattracting major international manufacturers and businesses.
- Abu Dhabi International Airport is currently undergoing an $8-billion (about Dh29.424 billion) expansion, increasing its capacity to 50 million passengers annually.
- High-profile investment in leisure, culture and tourism, which is currently growing at 17 per cent per annum: for example Yas Island, east of the city, will be developed into one of the world's showcase leisure destinations anchored by the first Ferrari theme park; Abu Dhabi's commercial business district will be regenerated by the Foster & Partners' designed Central Market development and Guggenheim will establish its largest museum outside New York on Saadiyat Island.
- High demand for rental property with a current shortage of stock.
- High demand for owner/occupier property for long-term residents.
- Comparatively low purchase prices per square foot compared to other capital cities around the world but with strong rentals.
- A tax-free environment with relatively low buying/selling costs and easy repatriation of income and profits.
- An established property management and leasing industry by companies following international standards and practices.
Given that the location is ideal, what should a new investor do next?
- Consider why you are buying? Is it for rental or personal use? If rental, consider who your potential tenants will be and what they will require.
- Compare the costs of property per square foot and individual unit costs. Often an efficient, well-designed unit can be a better buy than a larger poorly designed one.
- Factor in buying and selling costs and any fees associated with ownership and the management of the property.
- Look at current rents in as similar a unit as possible, taking into consideration location, size and facilities.
- Meet with a reputable real estate company with relevant local market experience to discuss the pros and cons of various options.
- Calculate the potential yield.
- Look at available options: There are opportunities to buy anything from one-bedroom apartments through to land plots for development of towers and opportunities to buy full buildings of more than 400 units in projects such as Najmat, Shams, Abu Dhabi Pearl, Hydra and Manazel. Commercial space is also available in the form of individual units or development opportunities.
Master planned development
With Al Raha Gardens due to begin handover in March, we will see the beginning of individual unit owners as landlords which should kick-start a more competitive market environment.
This project was one of the first master planned developments to be launched in Abu Dhabi and clearly shows attention to planning on design, specification and community facilities, including education, leisure and retail.
Smaller flats and villas still continue to be more in demand with layout, appliances, adequate storage and good maintenance often being deciding factors.
Rental market
The rental market in Abu Dhabi over the last few years has allowed most landlords to enjoy increasing rental income at extremely attractive returns, and, therefore, the capital's tenants have welcomed the recent rental cap of seven per cent per annum on renewals of existing tenancies.
However there is no cap on new tenancy contracts enabling landlords/investors to benefit from accelerating rental income on the open market.
Equally important, the rent cap initiative also reaffirms the commitment of Abu Dhabi to position the capital as a preferred business location.
It is a very clear message from the government that it recognised the negative impact that spiralling accommodation costs had on companies already operating in the capital, as well as those considering establishing their operations here as a result of the drive to attract new business to the emirate.
The soon-to-be-released new Companies Law and incentives to new and expanding businesses, including 100 per cent foreign ownership in certain market sectors, is also encouraging competitiveness and growth.
In addition, the government's changing attitude to monopolies can be publicly seen with the arrival of Du as a second telecommunications provider.
In summary, Abu Dhabi offers an extremely attractive opportunity for business and property investments.
The writer is Director of Business Development, LLJ Property
