UAE capital properties with high returns

With the Expo 2020 not very far away, developers in Dubai are thinking of creative ways of enticing buyers to purchase UAE properties. And how are they doing this?

To begin with, developers are waiving off the 4 percent registration fee to buyers of UAE properties and rolling out monthly payment schemes such as “capital guarantee” and “money back”. In fact, ace Dubai-based developer, Damac Properties, has announced a guaranteed annual return on advance payments during construction of 3 percent per year. The developer has claimed this to be equivalent to twice the interest on fixed deposits in a bid to entice buyers and will offer this interest twice a year until completion of the unit. Rental guarantee schemes are also being offered on Damac villas at Akoya Oygen and Akoya by Damac Towers by Paramount Hotels & Resorts (A, B and D); NAIA Ghalia, Damac Maison Majestine; Merano Tower; Paramount Tower Hotel & Residences; Damac Maison Privé (A and B) and NAIA Vantage.

Another option that has gained recent popularity is the “capital guarantee" which ensures UAE properties’ value for two years after delivery. It also implies that the developer will pay the difference to the investor if the unit price shows decline between the time of delivery and the end of 2019.

Does this signify confidence in and growth of the Dubai real estate sector? We at Better Homes think that such offerings are signs of belief in the sustainability of the Emirate’s property industry and are a good opportunity for those looking for safe investment and high returns in a stable market.

In February this year, Emaar Properties, Dubai’s largest developer, announced that it was waiving off the 4 percent registration fee on Casa villas in the Arabian Ranches development. Even better, this has been offered on ready to move in units. The developer has begun giving customers 12 months to make the full payment with the property agents minus the agency commission of 2 percent, transfer charges of 4 percent and the Oqood land registration charge of 4 percent which will be paid by the developer, Emaar itself.

Another developer, Aqua Properties, is making it easier for people to buy UAE properties, by offering a seven-year monthly payment plan for apartments in Skycourt Towers, Dubailand. Not just that; the developer claims that investors can expect a return on investment of over 10 percent. Seven Tides International, also a developer, has upped its guaranteed return on investment of 10 percent net per annum for three years under its hotel managed rental scheme.

According to recent estimates, UAE properties may continue to see a slight slowdown in activity this year due to lower oil prices. However, the market is anticipated to begin recovery in 2017 as infrastructure work surrounding the Dubai Expo 2020 gets underway. So, overall, while prices and rentals are likely to soften in the short term, they are likely to rise by 2017. The government’s infrastructure spend in the run-up to Expo 2020 is expected to sustain the property market and the population is expected to increase to five million by 2030, and in turn fuel demand for housing.
With the rolling out of such measures, UAE properties are becoming accessible to mid-income and salaried individuals who can now dream of owning a home in freehold locations. By making it theoretically cheaper to pay a mortgage than rent, given the stabilisation in sale prices of UAE properties in addition to sharp increases in rents, there has also been a change in expat outlook towards Dubai in general.

Traditionally considered more of a transit zone for expats, Dubai is presently increasingly being seen as a place for long-term stay. People are beginning to look at the city as home rather than just a transitory destination, are planning on staying longer and hence thinking of investing in a house rather than just renting one for a while. Interestingly, approximately 80 percent of mortgages in Dubai are taken out by end users, in particular, young couples taking the opportunity to invest in their first family home, and representing the majority of new mortgage seekers in the Emirates. This is testament to the fact that more people are not only considering home ownership, but that the shift from people renting to buying is great for stability of the market for UAE properties in the long term.

Experts are suggesting more policy changes and incentives to encourage homeownership, such as a better LTV rate for first-time buyers and reduced DLD fees. We at Better Homes also believe in the importance of maintaining affordability for the average first-time homebuyer, as in the majority of cases, financing tools such as mortgages and easy payment plans are critical to encourage participation in the real estate industry.

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Dubai and Abu Dhabi the Most Searched for Properties

A country of superlatives, the United Arab Emirates is one of the Middle East’s fastest growing nations. Its futuristic vision has made it possible for the city to conceive of and complete projects ranging from the world's tallest building, an island in the shape of a palm tree and the upcoming, world’s tallest Ferris wheel.

he UAE is also a city of contradictions in a sense. While the country is making strides to preserve its cultural heritage, it is also embracing new age technological advancements. Consequently, working and living in the UAE, particularly its key emirates, Dubai and Abu Dhabi, can be an exhilarating and rewarding experience given its strategic location and dynamic tax-free lifestyle.

Being the most searched cities in the UAE for real estate, Dubai and Abu Dhabi have a lot to offer savvy investors and end users. From budget and mid-range to luxury properties, the emirates feature some of the world’s finest trophy homes.

Experts reveal that this year is expected to be one of maturity and solid consolidation for Dubai properties and Abu Dhabi properties.  As for Dubai, it has been a buyer's market for a while now. With prices dipping and developers offering attractive payment plans, the outlook for the market is positive. Furthermore, while prices of Dubai properties have dipped, the rental market has remained strong given the rise in expat population and number of jobs with all the infrastructure investments planned around the mega Expo 2020 event. So, while it is true that the market is experiencing a slowdown and a further dip in prices may be inevitable, it’s important to note that it is a phase of healthy correction. Further, given Dubai’s ongoing investment in infrastructure, 2016 is a stable year for Dubai properties.

As for Abu Dhabi properties, numerous projects such as Mamsha on Saadiyat Island, Ansam, Mayan and West Yas on Yas Island and Al Hadeel on Raha Beach are expected to come online next year. The emirate offers a diverse unit mix with most developments less than five years old and are popular with tenants.

The real estate market in the UAE continues to mature as we see increased protections to investors with the introduction of RERA regulations giving it a layer of solid credibility and stability. Moreover, the country’s population is growing, further raising the demand for homes in the market.

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Abu Dhabi Property Market in 2016

The Abu Dhabi real estate market saw some good and not so good times last year. While sales prices in the Abu Dhabi residential and Abu Dhabi commercial segments have pretty much remained flat since the end of 2014, the Abu Dhabi renting sector saw a rise of close to 7 percent in some areas in 2015, according to market reports.

So, how will sales and leasing markets in Abu Dhabi perform this year? Let’s take a look.

As for new units coming on to the Abu Dhabi market, there doesn’t seem to be much to expect this year in terms of prime, affordable housing initiatives. While numerous projects such as Mamsha on Saadiyat Island, Ansam, Mayan and West Yas on Yas Island and Al Hadeel on Raha Beach are being planned, these are not expected to come online until next year. In fact, third-quarter 2015 reports state that only 2 to 3 percent will be added to the total housing stock every year over the next two to three years in the capital.

On the other hand, leasing demand in the Abu Dhabi residential market has remained strong, with rents witnessing a spike of 5 to 7 percent last year. Recent data reveals that rents are expected to witness an increase of 4 to 5 percent this year. Factors that have contributed to this rise may have been low supply together with an increasing population, as according to the Statistics Centre in Abu Dhabi, the average annual population growth rate over the last eight years has been over 7 percent. The outlook for the economy also seems positive with the IMF’s latest reports suggesting that the UAE economy is anticipated to grow by 3 percent this year.

A long awaited property regulation has been brought into effect and could aggravate the undersupply. The new law focuses on developers and investors, and has been initiated to enhance transparency in the market and thereby make it more attractive for investors. As per the ruling, developers have to meet new requirements for licensing and act swiftly to adhere to deadlines imposed by the law if they are to avoid penalties. The regulation may make developers cautious and make development less likely to occur, especially in prime areas. Furthermore, a rental index based on indicators such as location and number of bedrooms similar to RERA’s Rental Index may be in the works; however, there has been no indication as to when it will be announced or implemented so far.

A question that’s on everybody’s mind is how oil prices will affect the Abu Dhabi commercial and Abu Dhabi residential real estate markets. The oil price decline has led to a reduction in government spending with regard to future projects, softening investors sentiments due to lack of supply. While continued increases in leasing prices should lead to rises in sale transactions, this doesn’t seem to be organically developing. However, we think that continued rent rises may lead to investors and end users jumping in to take advantage of high yields and control rents. Moreover, as the population rises, rents will rise and returns will keep looking good. This will in turn have buyers coming back to the market to cash in on savings.

However, if the Abu Dhabi government spending takes a cut and companies lay off employees, then the population is likely to stagnate, giving way to bloated housing inventories which may in turn cause sale and rent prices to fall. So it seems like market stability will be dependent on the government continuing to invest in major new infrastructure and economic development projects.

Hence, how the market will perform will depend on a myriad of factors. We’ll have to wait and watch. 

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