Saturday, November 15, 2014

Affordable Housing in Dubai

I have been in Dubai for nearly 10 years now. One thing I fail to understand that why every single developer is focusing on 20 percent of the market when it comes to housing. The cheapest 3 bed ready villas in Dubai are selling for AED 3 million. Also looking at the new launches a 3 bed villa is priced at around AED 2.5 Million.

Now we are looking at the off plan market and we know that they are not selling that many properties. The main reason is that every single developer is looking at the same market segment. I fail to understand that why all these developers are looking at the same market segment.

There are few very obvious problems with this approach. Firstly, there are limited number of customers in this segment. This is the current situation we are currently facing. The market is flooded with Villas for this similar Price range.

Secondly, once you have so many properties of the same type we will have an over supply. This is the current market condition. We have so many off plan properties and not enough buyers. Now I am sure in the long run the equilibrium will be achieved. The concern is in the short run and the medium term.

It shows that we need affordable housing in Dubai. It is important to understand that there is a demand for affordable housing. For developers this is an untapped market. It is important to understand that 75% of the population earns 40K per year on average. So currently we can say that the developers are not serving the 75% of the population.

The other issue is, where do we expect people earning lower salaries to live? We expect them to come to work every day but don't care where they live. The only place currently in Dubai is International City where blue collar worker can live. Even in International City the apartments cannot be overcrowded.

It is very important to provide  housing of the other 75% of the population. The affordable Villas should be priced from 600K - 900K. This market is still viable and Developers should focus on this market segment as well.

Sunday, May 25, 2014

What to look for, when buying Dubai Property

Recently I had quite a few people asking me a question that which  area they should focus to buy their properties.
 
It is an extremely good question for the property market of Dubai. It is important to understand that Dubai is a fast moving city. Government is always coming up with new developments and plans for Dubai. These plans have positive and negative impacts on the property value of those areas.
 
Therefore, it is crucial to do the research on the area and planned developments in the area by the state or any other organization.
 
Just to give you an example as I give the same example to many of my customers. If you buy an apartment in Downtown area there is a significant difference between the property with the Dancing fountain view or an apartment with no view. We can easily say that a one bed apartment with a Dancing Fountain view will be at least AED 300,000 more than an apartment with no view.
 
Now let us suppose you purchased your apartment when there was no dancing fountain and then a year later the government built the Dancing fountain. This dancing fountain is right in front of your apartment. As a result of this Dancing fountain your, property value goes up by AED 300,000.
 
So it is crucial to do some research on the area that you want to buy your property in. Some areas area already developed and they already have the Dancing fountain there. However there are many areas where the government has plan good projects and attractions. It will always pay to do some research on the area.
 
Another good example is the planned metro stations. We always know that the metro stations will increase the value of the properties close to metro stations.
 
Properties close to the DWC have also increased in value in the nearby area. Also, properties close to the EXPO 2020 should also see an increase in the property value close to the site.

Tuesday, May 20, 2014

Uptown Mirdiff Property Price





At last the title deed for Uptown Mirdiff property has been issued  from the Land Department Dubai.  For the last six years the project was not registered with the Dubai Land Department.
There has always been a very high demand for rental properties in Uptown Mirdiff. Since the announcement of the Expo 2020 and the title deeds issued the price of properties has increased in the last six months. The price of a 2 bed apartment in Uptown Mirdiff in JAN 2014 was around AED 1.6 Million. The current market price of a 2 bed is around AED 2 Million. This is 25% increase in the last five months.
It looks like even with the current price increase we are going to observe a more increase in the property value. Union Properties have already invested in expanding the Uptown Mirdiff Shopping Mall. The area next to the food court is already under construction. The extra retail area the improvements should increase the property value.
The Mosque is also nearly completed and should be open for prayers in the next few months. The Owner Association for Uptown Mirdiff is also going to be registered. Once the owner association is registered we should also see an improvement in the service provided.
The RTA has also planed a Metro station for Mirdiff City centre. This is going to the nearest station to Uptown Mirdiff. This will conveniently link Uptown Midriff to the rest of Dubai.
The road works just outside Uptown Mirdiff on the round about is also going to improve the access to Uptown.
The area just being 5KM away from one of the largest employer of Dubai always have a very high demand for rental properties. The area is popular among the Emirates Airline staff and the  airport staff.
Overall it still looks like that the property price and rental demand is still looking to go up.  

Sunday, November 3, 2013

Expo 2020-Dubai


Expo 2020-Dubai

Anywhere you go nowadays in Dubai, it is very difficult to have a conversation with someone without mentioning the Expo 2020. It looks like every resident of Dubai believes that the Expo 2020 will be held in Dubai. In a very strange way the Expo 2020 bid has united the whole Dubai. Local or non-local every individual believes if Dubai wins the bid, I will win the bid. We as resident of Dubai are strongly behind Dubai to be the host nation for the Expo 2020.

It is important to observe the impact so far on Dubai. We can easily say that one of the main reasons for the property price to up is the confidence of investors. Majority of investors believe that Dubai will host the Expo 2020. There is also a positive sentiment in the business community and rents for commercial offices and shops are also increasing.

It will not be fair for me not to mention the report by Oxford Economics that indicates that the Expo 2020 will support 277,000 jobs in Dubai. Very interestingly the report also suggests that for every Expo employee roughly 60 jobs will be maintained across other parts of the Mena region. It is quite obvious that the region as whole is set to benefit from the deal.

If Dubai wins the bid for the Expo 2020, we will see an increase in property value in Dubai. Not only in Dubai the price increase is going to spill over to Abu Dhabi, Sharjah and Ajman too. The most important element will be the foreign investment in all sectors. The hospitality sector will benefit the most. The increase in employment in the hospitality sector and other sectors for that matter will increase the housing cost. It is worth mentioning that the cost of housing has increased already by 40% this year alone.

Again we will be expecting a large number of construction projects to start as they are already in action. It looks like the construction should increase in all of Dubai and the UAE. The problem as I have mentioned in my previous blogs is still going to be affordable housing. It is important to look at the picture in a different angle. A person currently employed and paying rent is finding it already difficult. After the Expo 2020 confirmation we will see another increase in rentals. It will be even a bigger struggle for people.

The solution I will come back to again is affordable housing. The government should look to take steps to provide affordable housing to people. This will ensure that the brain drain that can be created by the housing cost can stay to a minimum. Private firms should also look to work on affordable housing projects. As currently every developer big or small is focusing over the high-end market.

Thursday, October 3, 2013

Rentals In Dubai


Over the period of last eight years we have seen some major reductions and increases in the rentals in all areas of Dubai. 


The Graph above shows how aggressive was the change in Dubai during the last 6 years. There are some serious issues with regards to these reductions and increases. As the rents have started to increase we are observing disputes between landlords and tenants very frequently. 
The landlords argue they can achieve more rent for their properties so why should they rent the property on old rents. I can in a way understand their argument as well. As an investor your aim is always to maximise the return on your investment. 
On the other hand lets look at the argument form the tenant side. The rent increase should be reasonable or in line with inflation. At the same time RERA rental index is also a good measure. But what to do about the greedy Landlords who don’t care of the lively hood of their tenants and their families and just want to fill their pockets. 
It is important to understand the rents only increase if there is a demand for that property. I don’t think anyone will argue with that. So we can safely say that the demand for properties in Dubai has increased. It is also obvious that there is a lack of supply of rental properties in Dubai. So it really comes down to the normal demand and supply. 
Now, the question is; is it really wise to control the market forces or we should encourage the market forces to decide the rents and the rental charged? I believe laws are required to regulate the market. At the same time you do not want unhappy investors who can easily look for other markets to divert their investments. One of the main issue facing the international investor is the regulation regarding rentals in the emirate. 
On the other hand if the rent continues to go higher it becomes less attractive for people to work on the same salaries. Employees start demanding higher package to compensate them for higher rent or they will move to other parts of the world where things are better. So you are also at risk of losing human capital. 
Once the employees start asking for increased salaries to compensate them for higher rent it becomes difficult for companies to continue with the same profitability. 
Any issue with regards to rental is not a straightforward issue and it has a short and long term effect on cities. To resolve this issue the only way forward is to develop more housing in Dubai. There is a serious shortage of low cost housing for families. Currently, families on low income live in Sharjah and Ajman where they can enjoy low rents. 
To create a society where people can live without the stress of increasing rent every year, it is important to introduce affordable housing. There are areas in Dubai where affordable housing can be developed and the government should encourage companies to develop affordable housing. 




Friday, September 20, 2013

Dubai Real Estate Brokers


So it starts again, the property prices are increasing at a very high rate in Dubai. There are always challenges with good news. We have already started to see problems with unfulfilled commitments by the Landlords. At the same time we are seeing an army of new agents entering the Dubai property market.


I really have to praise the Dubai Land Department and RERA where they have taken prompt actions to normalize the market. It is also very important the role of RERA where they have regulated the Brokers and have provided them training so the service standard can be increased and the brokers provide a uniform service.


As a new investor there is nothing more important to deal with a RERA register broker. Always check their Broker ID card and check their company details on Dubai Land web site. Make sure the person you deal with has a good knowledge about the Dubai Market as well. Majority of Professorial brokers mainly deal in their particular areas. This provides them with in depth knowledge, which in turns helps the investor.


RERA has now introduced standard forms. The forms are completed by the brokers and signed by the buyer or the seller to confirm their commitment. Even with these form introduced many brokers are not getting these forms signed and hence sellers renege on their promise. This causes confusion for new investors.


It is very important for the investors to be aware of the buying and selling procedures in Dubai (for more information on sales procedures please visit http://www.dubailand.gov.ae/English/Tanzeem/Investors/Home.aspx). Once the buyer and seller are aware of the procedures they can ask the brokers the question, if the relevant forms is signed.


By asking these question there are two benefits. Firstly, you can easily establish is the brokers is aware of the processes and procedures. Secondly, if the relevant forms are not signed then in most cases you will be wasting time with the agent. 


It is also very important to know that the area you want to invest in. There are so many areas new and old developments. All the areas cater for different target market. There are number of Free Zones in Dubai (to get more information on different Free Zones in Dubai please visit http://www.blackarrowrealestate.com/?act=freezones&m=dubaifreezones). All the Free Zones provide facilities for people related to their relevant industries.


As everyone now knows that Dubai is expanding. The areas expanding create their own opportunities and it is important as an investor that you do your research before you invest money in an area.


Again a good broker should know the pros and cons about and area and should be in a position to provide you detailed information about the areas. Always remember good broker can make your life easier so it is very important to look for a good broker.   

Saturday, April 13, 2013

New Emaar Launch

I walked out of the Lift as I luckily parked my car in the Basement of Emaar Sales Office in Dubai Downtown area. A gentleman walked up to me and my friend and asked me, "today is Saturday it looks like Emaar is looking for new staff, there are hundreds of people waiting outside to be interviewed".

I looked at my friend and smiled, we explained him that the people outside are waiting to obtain tokens to purchase Emaar Properties new Launch.

There were not hundreds but they were thousands of people outside Emaar Sales office in the hope of buying their new release.

On Thursday people received a Text message from Emaar inviting them to buy the Properties they are about launch on Saturday 13th APR 2013. At the same time there were hundreds of people outside Emaar office in Downtown. It reminded me the period before the crisis in Dubai. I decided to visit the area a day before the launch on Friday just to see investors appetite for the Villas. I was actually quite amazed to see that there were at least a thousand people there, waiting for the Emaar office to open.



I went to their office today quite early in the morning at around 6:30 am. At this time I was not shocked to see thousands of people outside their office.

I guess, there should be around five to six thousand people outside their office waiting for the tokens to be distributed.

Just to let you know that there were only 188 Townhouse Villas to be sold the starting price was AED 988,000 (USD 270,685). People living in Dubai or related to Dubai Properties knew straightaway that it is a great deal.
 When people used to come to our office during the crisis period we used to tell them these stories that people are selling their queuing ticked for AED 10,000 (USD 2740) at property launches. Just wait in the queue get a ticket and sell the ticket. So people make money without buying of selling a property.

The same story was repeated today reminded me of the time before the crisis and provided everyone confidence that Dubai is Back. There were people offering as much as AED 150,000 (USD 41,095) just to buy the queuing tickets.
The Sale Price was extremely low. It is not possible to buy a 3 bed Townhouse Villa in Dubai at that price. Investors have great believe in Emaar projects and the quality of community they built. Their development Greens is still very popular after all these years.

The only thing that I thought was not very pleasing was the way the investors were handled. Emaar could come up with a better solution when it come to the queuing system.

There was police on the Roads and an ambulance, which was very important, as people could easily get injured due to the amount of people. There were no clear instruction were to queue up from and very little information on their web site.

I think it would be fair to allocate token numbers online as it will be a lot more safer. Even with all the chaos we can safely say that Dubai is Back.