The 16th edition of Cityscape Global brings changes that could stir greater interest in the annual real estate expo. The most notable is the decision to allow developers to sell on-site. In what is a first for Cityscape, which will be held this year on September 11-13 at the Dubai World Trade Centre, developers of UAE projects will be allowed to sign sales deals during the show, which opens a new window of opportunity for both sellers and visitors. Furthermore, with residential prices now near the bottom of the current cycle, there are a lot of great deals now available in the market. Here are some reasons why it’s a good time to buy in Dubai.
1. New REIT choices
There are a number of Real Estate Investment Trusts (REITs) that have entered the market this year. Consequently, a lot of new activity is happening in the REIT market, with several new products being launched or planned in Dubai and Abu Dhabi this year, according to Craig Plumb, head of research at JLL Middle East and North Africa. “The major attraction of REITs is that they allow small retail investors to participate in the real estate sector without the need to buy real estate assets directly, which is time-consuming, lumpy and relatively expensive,” says Plumb.
JLL expects more REITs to be launched over the next few years focusing on sector-specific vehicles to attract investors looking for exposure to a particular asset class such as hospitality, logistics or education. “Dubai currently is the best market in the region for institutional investors, but it is limited by a lack of good-quality investment products on secure long-term leases,” says Plumb. “If more products of this type were offered at the right price, there would be strong interest from investors.”
2. Affordable housing
The availability of affordable housing options in the market attracts both investors and end users. Plumb says the shift towards the middle-income or affordable sector over the past few years is a positive development. “An increasing number of developers are launching projects in line with JLL’s definition of affordable, i.e. Dh780,000 for two-bedroom units,” says Plumb. “And the availability of more affordable housing in the market increases the attraction and competitiveness of the city.”
A major issue now facing the market is ensuring that such housing units remain affordable by limiting purchases by investors. “The challenge to Dubai’s position as a competitive global city is confirmed by a recent study from Rent Café, which shows that renters in Dubai currently spend an average of 39 per cent of their salaries on rents, making it the ninth most expensive of the 30 global cities covered in their report.”
3. Off-plan deals
The past two quarters have seen off-plan surpassing secondary market sales by 30 per cent, which shows the amount of investor confidence in Dubai. “We have seen payment plans extended to post completion so buyers can pay up to 30 per cent after the handover of the keys, which enables them to get rental income to help cover the costs,” says Laura Adams, managing director of Carlton Real Estate. “Others have put 70 per cent as final completion payment, which is in line with the amount banks are lending.”
4. High returns
Dubai’s property market offers attractive rental returns when compared with other places in the world. Richard Paul, head of residential valuations at Cluttons, says that even in a softening market, investors can achieve gross yields of between 6 per cent and 10 per cent. Additionally, financing for such investments are available at interest rates of around 4 per cent, which is competitive compared with interest rates offered in other markets around the world.
He explains that the Dubai property market is still a relatively high-risk profile option, but allows investors to achieve higher returns. “The risk profile of any investment defines what kind of yield returns it can offer,” says Paul. “The real estate market in Dubai is a young market; investment options for expats manifested only in 2003, so understanding a market which has fast-changing cycles and influences can be challenging, but there lies the upside of the potential for greater return. When comparing Dubai with more mature markets with more predicable cycles, the potential returns are often lower.”
Paul believes that Dubai can certainly offer excellent returns for investors, but only if investors fully understand the market.
“They must carry out necessary due diligence and look to seek out impartial professional advice,” he says. “The present market is ideal for longer-term buyers with an investment outlook of five or more years, who are looking to purchase a property at the bottom of a pricing cycle. However, they need to be committed to the region.
“I would discourage speculative buyers who think they might make a quick profit by exiting in 12-24 months. I don’t see a quick turn in prices in the short term, neither do I want speculative buyers upsetting market stability.”
5. Community choices
Buyers in Dubai now have a wider range of property options. In recent years, several new projects have been launched in emerging as well as more established communities, and the government has also recently announced significant spends on the city’s infrastructure.
Paul points to communities that are well developed and have good levels of infrastructure, roads and proximity to other facilities, including hospitals and schools. “Look for properties that have established and built-up surrounding areas,” he says. “Locations that are fairly speculative will tend to have a lot of vacant space neighbouring them. As such, they can be affected by more supply surrounding them and unforeseen development changes, which could ultimately result in prices softening.”
6. Expo 2020 and Vision 2021
“We hope that the Expo and Vision 2021 will bring the spotlight back on Dubai,” says Paul. “In turn, hopefully we will see firms from around the globe consider expansion and relocation plans into the region. The hope is that this brings growth in commerce and employment opportunities and thus a flux in the population, which in turn will lead to an increase in demand for residential property and stability in pricing.”
7. Upbeat trends
As the market tightens this summer, developers are offering attractive deals to win sales, says Sandrine Loureiro, operations manager of Rocky Real Estate. “Payment plans offering 20-80 or 25-75 schemes have become stretched to instalments over four and five years post handover,” says Loureiro. “This is very attractive to some investors. Investors are now looking at quality versus price and location, as well as long-term returns.
“Master communities that are offering lifestyle and quality at a price such as Damac Hills, Nshama, Ellington and Azizi Riviera have received a lot of interest for their value-for-money products. Affordable products, which were not available before, have been launched by companies such as Danube, Azizi and Damac [wherein] clients can purchase a studio from Dh400,000 and a villa from Dh1 million. Owning property is a tangible, solid, long-term investment. Whether the markets go up or down, the asset is always there and offers a regular income, a holiday home or a safe haven.”