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Latest News

Tue, 26 May 2009 7:15:45 +0400
Property law No 9 A Relief
Although no announcements are scheduled until the end of the month, RERA's CEO Marwan Bin Ghalita said that he expected about 25% of the projects in Dubai would be cancelled. According to RERA's Law no. 9, investors who put their money into projects which are subsequently cancelled by the Dubai Government will get a full refund.
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Sat, 27 Dec 2008 6:20:40 +0400
Damac makes steady progress for timely delivery of Ocean Heights project
In a bid to deliver its project on schedule, Damac Properties is said to be making steady progress on the 'Ocean Heights Tower' project at Dubai Marina, by completing one floor every 5.2days.
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Thu, 25 Dec 2008 5:25:22 +0400
"Properties can still yield considerable bargains, if sold wisely": Realty agents
According to real estate agents in Dubai, property can still reap considerable profits. They have warned that owners need to be realistic about the value for which they can sell their homes in the current market condition.
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Tue, 2 Dec 2008 9:06:00 +0400
Solanki Holdings forays into UAE property sector
Solanki Holding and Investments Limited, leading UAE-based conglomerate, forayed into proper sector with the launch of their new entity, Solanki Real Estate, projected to invest Dh.12bn into the sector.
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Tue, 25 Nov 2008 5:25:22 +0400
Habtoor Group announces sale of Harbour Island Resort & Spa apartments
For the first time, Habtoor Group has announced sale of its 24 freehold apartments of 'Harbour Island Resort & Spa' development on the Crescent, at the Palm Jumeirah. The announcement was made by Mohammed K. Al Habtoor, the Chief Executive of the group. The project, currently estimated to be worth of Dh1.2billion, may go up further, depending on prices of materials.
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Mon, 24 Nov 2008 6:40:30 +0400

Making an investment case for Dubai Real Estate

Buying a property in Dubai to rent out and not just to replace rent, is now an option for expatriates as well as UAE nationals. Does this make sense? What are the pitfalls? How big might the profits be? Phil Thompson reports.

The case for buying rather than renting property in Dubai is pretty well proven. In a nutshell, anyone living in the city for five years or more will at least get something back later if they buy, rather than nothing if they rent.

But what about buying a property in Dubai as an investment, and not as a home? Is there a solid investment argument for buying a property and renting it out?

Let us consider what this involves, and look at a typical scenario. Say you have decided to buy an apartment in The Greens, a large apartment complex overlooking the Emirates Golf Club. You put down a 20% deposit and obtain finance for the balance of 80% from Amlak, Dubai Islamic Bank or Mashreqbank.

Now assuming this property has vacant possession, you can go straight to a reputable agency - say Better Homes or Asteco - and ask them to rent it out for you and manage the property. UAE nationals have been doing this for years, and payment of a year's rental in advance is commonplace in Dubai.

Here is one fantasy risk: you may not find a tenant. Considering that there is a queue of people looking for apartments in The Greens, that is a) unlikely and b) you could always drop your rental price if the market turned sour.

Now at present rental rates you will obtain an 8-9% yield on your apartment. That means you get a rental equivalent to 8-9% of what you have just paid. As mortgage rates are presently 6.5% that leaves you with enough to cover your agents' modest fees, service charges and maintenance, and perhaps leave a few dirhams in the bank.

In fact more than a few dirhams, as rent and deposits are paid in advance and mortgages are paid in arrears. This is a positive cash flow situation, but don't rush out and spend the money that you will need to gradually pay the mortgage.

Well, you might say. 'What on earth is the point of buying an apartment and renting it out, if all I get is a few dirhams in the bank and a pile of invoices from Better Homes at the end of the year? And what if interest rates go up and I have to pay some of my own cash to meet the mortgage payments?'

However, this misses the point entirely. For you will gradually own the equity in a valuable asset, i.e. this apartment. Indeed, once the mortgage is paid off in 10-15 years you can sell it and the whole amount is your profit. You could, of course, sell it after just a few years, so long as the price had not gone down, and still have a nice chunk of cash.

Not bad when you have done no more than put down 20% in actual cash from your pocket. How many investments could give you an almost guaranteed 500% return in 10-15 years?

Moreover, property hedges your investment against inflation because if there is inflation the rents will go up and the value of the property too. But rather conveniently the debt will be fixed and not rise at all. This will certainly compensate you for fluctuations in interest rates (though why not fix them with Dubai Islamic Bank?)

This is where property investment can become really interesting. Over 10-15 years property prices do generally rise in line with inflation, or even higher, delivering a 'house price inflation' bonus to the owner.

You perhaps have to take a view on the future of Dubai. Will Dubai be a thriving, multi-cultural trade, financial, tourism and services hub in 10-15 years time? Or will the city suffer some sort of socio-economic or political cataclysm? Those who have seen the past 20 years smile at predictions of gloom which have always been wrong in the past.

Besides even if your property is worth nothing when your tenants have finished paying off your mortgage you still have a roof over your head, or you can continue to take the rent as your income.

Then again, you could argue that Dubai property is expensive and that anyone buying now will regret not waiting for a while. But is this true? At $1,000 per square metre for a villa, Dubai real estate is five times cheaper than in London where the average salary is no higher and maybe lower.

This is the last, and most important, consideration for an investor. The reality is that Dubai property is cheap, by international standards, by local standards, by rental yield, in absolute terms, by whatever yardstick you choose.

What will change this? New real estate laws? A greater availability of mortgages? More buyers moving into the market? A more peaceful Middle East? The success of Dubai? Most likely all of the above, and thus real estate prices will increase over time.

Can an investor go wrong? Of course, anyone can make basic mistakes in buying real estate, such as choosing a poor property in a bad location. But it is hard to make a solid argument against Dubai property investment right now

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