Yields are in investors’ favour in Dubai realty

Yes ... Dubai’s real estate continues to give its investors the best deals. The mid-market residential community, which accounted for more than 20 per cent of the 5,000 new homes that were completed and handed over during the first six months of the year, is proof to this fact.

As per the latest stats, the value of the total real estate transactions surged by 33 per cent to more than Dh34 billion during the first five months in comparison to Dh24 billion last year. Again, reports suggest that the emirate’s property market didn’t slow down even during Ramadan, a period typically marked by lower sales.

Dubai witnessed 3,089 transactions during Ramadan this year, a jump over the 2,684 transactions during a similar period last year. Property deals amounting to Dh5.6 billion were accomplished between May 5 and June 3 this year. All these developments are enough to suggest that the local real estate sector continues to be investor friendly.

In a demand-driven market, there is nothing called an ideal situation. However, investors must try to build a unique property portfolio that allows continuous long-term growth and re-investment rather than just short-run hits. While making such investments, an investor should be clear about prospective clients, aware of end users, the expat possibilities, long-term investors, and also first-time buyers.

It is also important that investors do business with developers that have the ability to deliver on time. Residential and commercial properties, with deals touching Dh17 billion during the first five months, remain the best bets for investors at any given point of time. Transactions involving land purchases reached Dh14 billion between January and May.

With that being said, buyers continue to remain interested in villas, with transaction values reaching up to Dh3 billion during the period. For better returns, investors should have a good idea of properties available in any given market. It allows them the flexibility to resell whatever is in demand at that particular point in time.

Yields are stacking up nicely

Over the years, affordable real estate witnessed considerable growth with developers prioritising the construction of more such units. Moreover, investors who don’t intend to live in the purchased properties are buying them to take benefits from Dubai’s — still — relatively high rents. At present, the return on investment (RoI) for residential property in the emirate stands at around 6-8 per cent, which is much higher than many other cities.

A similar property, according to the latest report by Moody’s Investors Service, fetches less than 2 per cent in Hong Kong while in London and Singapore, the RoI veers between 3.7-4.5 per cent.

The Expo 2020 will be adding to the confidence of real estate investors. Massive marketing campaigns to promote the Expo is likely to benefit the emirate for a long time. Market players are expecting additional demand and capital appreciation during and after the show, which is expected to woo 25 million international visitors.

They will get a chance to ponder over the opportunities to relocate and settle in Dubai, thus attracting a new set of residents to the city. Considering all these factors, investors remain optimistic and are increasingly putting up their money with their eyes set on the return on investments in about a year.

In other words, purchasing property now would have investors wait for a short period to get good enough returns.

Kalpesh Kinariwala is Chairman of Pantheon Group.