For many first-time property buyers, it is important to keep a budget in mind when buying a home either to live in or for investment. Most expats in Dubai spend around 30-40 per cent of their income towards rents. Having your home can help you save that money and invest it in a property that will give you a good return of investment in a few years. Stepping on the property ladder is a great decision when backed by sound choices in location, price and quality of product, and having a fair idea of rental yields. Buying property under Dh1 million is often a starting point for many first-time buyers and the excellent news is that Dubai has a range of units at that price point. So, if you have a household income of Dh10,000 per month, you can consider buying real estate in Dubai.
The first question to ask concerns your financial status: whether you have the funds to pay for the down payment and associated charges as these are vital to obtaining a mortgage. In addition, if buying off-plan, consider if you can afford the monthly payments until the unit handover, which may take around three to five years, unless it is a ready unit with a rent-to-own scheme.
Once you know that you can afford to pay for the unit, next is to look for the right location. This largely depends on personal preferences like the house being near schools or your workplace, having beach access etc. The next essential factor is the property itself and the developer. Find out details of the infrastructure, amenities and facilities as all these can influence a buyer’s decision.
For most expats, the decision to invest in property in Dubai is also influenced by other reasons, such as job security, children’s education and the need for permanent residency. Developers are offering multiple choices with most of new supply in the Dh1-million-and-below bracket coming up in Dubailand and the corridor between E311 and E611. You also have town house options within that bracket being built by Emaar in Dubai South. This trend of building affordable property, below Dh1 million, started in 2017 and it continues in 2019 with developers now offering competitive payment plans, making units more accessible for the buyers.
As properties age in Dubai, they also become affordable to the buyer. The stock of buildings, town houses and villas that are more than 10-15 years are now available for less than Dh1 million in the emirate. Here it is important to note that the new stock is more expensive per square foot and are smaller in size when compared with the older units where bedroom, kitchens and living areas are spacious. As such, a buyer actually pays more when buying in newer buildings.
Traditionally, certain areas in Dubai offer good yields to property investors. As per the first quarter sales transactions, studio apartments in International City sold at Dh200,000 and achieved high returns. Other areas known for high yields are IMPZ and Remraam. Moreover, Discovery Gardens, due to the Expo 2020 Metro link (soon to be operational), also receives high returns and has a high potential for capital appreciation. These areas in Dubai have been enjoying high yields — they offer net yields of 8-9 per cent and are low in terms of unit prices.
The author is the head of real estate research at ValuStrat. The views expressed here are his own.