I am domiciled in Germany and thinking of investing in an apartment in Dubai. I would rent out the property initially, and intend to use it myself when I retire. Can you advice me on what I should consider?

14-Jul-2012 - FREEHOLD



Q1: I am domiciled in Germany and thinking of investing in an apartment in Dubai. I would rent out the property initially, and intend to use it myself when I retire. Can you advice me on what I should consider?

A1: I am assuming that proximity to the beach would be preferable for you. The income you will receive from this investment will be greater since the majority of tenants aspire to live near a beach. It also opens up the option for short-term rentals. If the property is managed well by a professional agent, this strategy can provide you superior returns.

Jumeirah Beach Residence. Dubai Marina or the Palm Jumeirah all offer a sought-after lifestyle, while providing excellent amenities and entertainment options. These developments are very popular with holiday makers, residents and retirees alike. Quality properties are available in the range of Dh 800 per sq.ft to Dh 2,500 per sq.ft.

You should expect a minimum net rental return of around 7%, which makes for a solid investment in preparation for outright ownership upon your retirement. Diligence is required with factors such as location, the developer’s record, quality, service fees, building management and the existence of a functioning owner’s association.

Q2: There is news that Dubai’s real estate decline has bottomed out and excellent opportunities exist in villa investment. I am looking for a villa in the Dh 3 million to Dh5 million price range. Can you make a recommendation?

A2: After years of decline, research shows that prices for villas in Dubai are starting to stabilize and have even increased in sought-after neighborhoods.
A fair proportion of the demand is focused on locations such as Arabian Ranches, Palm Jumeirah, Emirates Living communities (i.e The Springs, Meadows and Lakes) and Emirates Hills, More affordable villas can be found in developments such as Falcon city, The Villa project, Sports City and Motor City in Dubailand, where prices are often up to 30% less than in established communities.

The Villa Project in Dubailand has become a much sough-after community. The primary attraction of buying a unit there is that it offers good value for money. One can purchase a large, brand new villa at a relatively lower price in comparison with most similar-sized properties in other parts of Dubai.
Superior value for money has been reflected in very healthy capital gains for owners. A 4-bedroom unit in The Villa cost Dh1.9 million in August 2011, but the same unit today is worth Dh2.8 million. Likewise. Rentals have also gone up. A 4-bedroom villa that used to be rented for Dh 120,000 in August last year is now available for rent at Dh 165,000.

Q3: Will the prices go up or down in the rest of 2012:?

A3: Overall stability has returned to the market as far as prices are concerned, while good quality developments have witnessed price appreciation and increase in rents. The villa segment, in particular, has seen sales prices and rents increase mainly due to a combination of increased demand and relatively limited supply. Villa price increased mainly due to a combination of increased demand and relatively limited supply. Villa price increases in Q1 2012 versus the prior quarter were in the range of 5 to 12%, depending on the development. Top performers were the The Villa Project, Emirates Hills and Arabian Ranches.

Apartments rates around the city have generally stabilized as well. However, some areas such as Silicon Oasis, International city and Dubai Investments Park will remain under pressure due to new supply added to a segment which is already oversupplied. Having said that, locations renowned for their lifestyle appeal such as Dubai Marina. JLT and JBR, or the more affordable and up and coming Skycourts, have shown a lot of promise with quarter-on-quarter increases of 3% to 5%.