In a society that obsesses real estate and where price movements are etched into the fabric of the zeitgeist, it is important to ask the all important question: what do investors do to maximise their returns and protect their investment?
The answer, in light of the ongoing transparency initiative in the sector is surprisingly easy, let data be your guide. As Dubai’s realty market continues to mature, offering investors and end-users alike a plethora of choice, the road map to navigating this terrain is a return to first principles. That would mean asking a few simple — yet penetrating — questions about the role of the investment.
And, more importantly, the aspirational value of the investment that drives the decision making process. Accordingly, it is imperative to sift through a few important variables that need answering for investors and end-users alike.
To paraphrase the British property baron Lord Harold Samuel, the three things that matter most in property are future location, future location, future location. As developers offer a bewildering array of choice, it is important to consider the importance of particular communities and the probability of necessary infrastructure being built expeditiously, its impact on Dubai, its connectivity to arterial routes in the city and the master plan of the area.
Upcoming districts like Dubai World Central, parts of Dubailand (Arjan, Majan, Liwan, etc), Jumeirah Village, Silicon Oasis and Sports City offer a varying degree of choice but are in various stages of being built out. It is these varying stages that largely translate into price differentials in the marketplace.
However, in the current buyers’ market, it is important not to lose sight of what the community will look like in the next three to four years and decide accordingly.
In 1950, the average residential square feet per person in the US was less than 300; by 2000 that number had climbed to over 900, primarily because houses got bigger and families got smaller. The same is the case for Dubai, and as the city is in the midst of its latest building boom, it is natural for developers to optimise spaces by offering smaller sizes, thereby going the Hong Kong way.
However, it is this build choice that detracts end-users. In a crowded market place, developers that have stood out have been the ones to offer larger living spaces and amenities to capture the aspirational value of the end-user. Today, homes are the embodiment of “our heart’s desire” more so than ever before, and developers catering to this dynamic are the ones succeeding.
With the bewildering array of choice, it is sometimes difficult to make the right choice. Thankfully, with the increased transparency due to Rera (Real Estate Regulatory Agency), investors and end-users can look at developer track-record in gauging its ability to deliver projects.
It is perhaps this feature, more than any other variable, that acts as a guide in investment decisions. Developers with a successful profile receive strong responses even in the current soft market, without having to resort to gimmicks such as payment plans to win investor confidence.
As with most investments, timing is everything. Exogenous factors like interest rates and oil have an impact on decision making as much as location does. It is important to keep the macro environment in mind when taking the plunge. In the current era of plentiful supply, it may be better to wait for some time as the outlook for capital gains in the short term appear limited, and developer incentives are likely to increase to entice first-time buyers.
The decision to buy a home is a complicated one. It has been made more complicated because — until recently — data on housing supply had not been made widely available and mostly been held in privately held databases that have been widely inaccessible. Secondly, investors have been afraid to ask the right questions, primarily because real estate investments were touted as such an unmitigated virtue.
When the slot machine keeps paying out, why ask if it might be broken?
However, recent advances made by Rera has meant data has been made available to a larger populace and it should encourage more informed decision making.
Just like sunlight is the best disinfectant, it is with happiness that we can state that the era of ignorant bliss is over. Investors and end-users alike want to avoid the next housing bubble. With more accurate and timely information now available, decision-making can be undertaken to prevent bubbles from rising again.
The writer is Managing Director of Global Capital Partners.
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