Last month at a glance: • • • • • •
World’s 2nd hottest property market Dubai property rents will continue to rise Real estate upturn is boosting trade in Dubai Retail leads UAE’s commercial property prospects UAE tops GCC spend in home fit-outs market New law for Dubai property registration fees on warehouses Issue No. 6 - June 2013
Turkey
International property market
Latest From the Economy
UAE steadily heading towards knowledge based economy Dubai repays AED 3.34 billion bonds Dubai Expo 2020 would support 277,000 jobs Dubai World Central secures AED 24.5b investment Dubai Freehold Property
Palm Jumeirah, “Heaven’s Island” International Property Markets
International Property Markets - Turkey: “Yurtta Barış, Dünyada Barış” Real Estate Investing Lessons
Get the money to start the game of Real Estate (Part I)
Prepared by: Mo. Asadian
VALORAN MEMBER
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Valoran Real Estate Brokers Issue No. 6 - June 2013
News Digest
Last month at a glance
Dubai: World’s 2nd hottest property market According to the Forbes ranking of ‘The Hottest Real Estate Markets On Earth,’ which ranks real estate markets in 2012 based on the average house price growth, Dubai is ranked at No. 2, second only to Hong Kong, which saw house prices shoot up by a whopping 23.6 per cent last year. The average house price in Dubai, on the other hand, rose by 19 per cent in 2012, but with the first three months of 2013 already witnessing a massive rise in home-buying interest among end-user expatriates as well as investors, this year could see Dubai rise to the top of the global ladder. “Dubai housing prices rose 19 per cent in 2012, according to Knight Frank,” the Forbes report maintains. Indeed, according to Knight Frank’s Global Development Review 2013, “there is noticeable demand for prime real estate in Dubai and the level of transactions increased through 2012.”
Dubai real estate prices and rents witnessed 16th consecutive monthly increase in March, continuing the steady recovery in the sector and highlighting the return of investor confidence in Dubai, a recent report by Deutsche Bank said. Forbes list of the ten Hottest Property Markets on Earth: Country
Price surge in 2012
#1 Hong Kong:
23.6%
#2 Dubai:
19%
#3 Brazil:
13.7%
#4 Turkey:
10.5%
#5 Moscow:
10.2%
#6 Austria:
10.1%
#7 Taiwan:
9.7%
#8 China:
9.3%
#9 India:
8.5%
#10 Colombia:
8.3%
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Dubai property rents ‘will continue to rise’ According to the Dubai Statistics Centre, housing costs in April 2013 rose at their fastest pace for more than three years. Dubai certainly appears to be a more profitable market than Abu Dhabi, as figures suggested that rents in the latter fell last month. The rate of population growth in Abu Dhabi is still short of Dubai and the investment interest in Dubai’s property market is higher than Abu Dhabi. Unsurprisingly, certain parts of Dubai attract more interest from lodgers than others and it seems that more exclusive areas like Dubai Marina are particularly popular. Earlier this year, the Real Estate Regulatory Agency revealed that The Greens is another region that is highly desirable. The cost of renting a studio apartment in this part of town went up by an incredible 22 per cent between the end of 2012 and March 2013. In addition to this, owners of one-bedroom apartments hiked
their rents by 15 per cent over the same period, while two-bedroom properties were 28 per cent more expensive. Although there has been a sharp increase in the number of new buildings being erected across the city, experts predict that rising population figures will ensure that rents continue to go upwards in the near future.
Experts predict that rising population figures will ensure that rents continue to go upwards in the near future. Source: Jones Lang LaSalle
Dubai, United Arab Emirates
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Valoran Real Estate Brokers Issue No. 6 - June 2013
Real estate upturn is boosting trade in Dubai Leaders of Dubai Customs believe the recent upturn in activity in the city’s real estate market is helping to drive trade with other countries. Director General of the organization Ahmed Butti told that the Emirate’s thriving property industry - coupled with continued success in tourism and aviation has strengthened Dubai’s overall economy. Mr. Bhutti expects to see further growth of between 14 and 15 per cent by the end of the year and it seems that all sectors are performing well. Non-oil trade rose by 13 per cent in 2012 and there has also been a significant upturn in the amount of gold and diamonds being sold through Dubai. Dubai has established closer ties with major economic powers like India and China. Meanwhile, trade with Africa rose by 27 per cent last year and there was also a 28 per cent upturn in business between Dubai and its neighboring Arab states. The recovery of Dubai’s property market in the past 12 months has indeed been astonishing and there are signs that 2013 could be a boom year for real estate investment in this part of the UAE.
The recovery of Dubai’s property market in the past 12 months has indeed been astonishing and there are signs that 2013 could be a boom year for real estate investment in this part of the UAE.
Retail leads UAE’s commercial property prospects The recovery trend in the global commercial property sector is expected to persist during the second quarter of 2013, with a progressive increase in both, occupier and investment demand, led once again by a performing retail sector. The “Rics Global Commercial Property Survey” provides further evidence of a sustainable strengthening in the region’s economy, as tenant demand increased during the first quarter of 2013 for its fifth consecutive quarter and respondents expect rents to rise by around 5 per cent in the coming quarter. While availability of retail space has not dampened rental expectations, with rents expected to rise in particular for “prime” retail space, once again, the largest supply overhang remains in the office sector, with vacancy rates hovering around the 30 per cent mark in Dubai. Furthermore, development starts continued to rebound after some gloomy years post the recession, with starts rising at a quicker pace this year than in the previous quarters. The investment market also recorded strong positive results, with investment transactions rising and capital values on a recovery path. Significantly, the flow of distressed assets coming to the market has stabilized in recent quarters and this is expected to continue.
The flow of distressed assets coming to the market has stabilized in recent quarters and this is expected to continue.
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New law for Dubai property registration fees on warehouses His Highness Sheikh Mohammad Bin Rashid Al Maktoum has issued a law altering registration fees for property transactions on warehouses. He issued in his capacity as the Ruler of Dubai, Law No.2 for 2013 amending Law No.7 of 1997 regarding property registration fees. Under the new amended law, AED 10 fee shall be levied for registering every one square meter of the total area on which a warehouse is built, provided that the total registration charges do not surpass AED 10,000. This fee shall be implemented at the time of selling the warehouse plot. According to Sultan Butti Bin Mejren, Director General of the Dubai Land Department, the amended fees will have a positive impact on the industrial sector where it is expected to significantly help boost small and medium scale industrial enterprises as well as encourage investment in the industrial sector. As per this new amendment, the new fee will be less than the previous fee which was set at 2 per cent of the value of the sale contract.
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As per this new amendment, the new fee will be less than the previous fee which was set at 2 per cent of the value of the sale contract.
Valoran Real Estate Brokers Issue No. 6 - June 2013
UAE tops GCC spend in home fit-outs market The UAE is expected to be the biggest spender in the GCC on home interiors and fit-outs, with an estimated $1.5 billion (Dh5.5 billion) budget in 2013 as the country’s residential market continues to grow. Residential units worth approximately $13.9 billion are expected to be completed in the UAE this year, with interior contracting and fit-outs amounting to 11 per cent (or $1.5 billion) of the total project costs, according to a study by Ventures Middle East.
Other headlines in brief • Luxury home prices gain 5.4% in Dubai in Q1: This positions the Emirate among the top prime global residential markets. • Union Properties report AED 21.9 million Q1 net profits: Revenues for the quarter were down 31 per cent. • Damac Properties launch ‘Akoya by DAMAC’: Luxurious golf community covers 28 million sq. feet.
The UAE is also estimated to be the largest spender in the GCC on retail interior contracting and fit-outs this year with $266 million. Several retail outlets are slated for opening this year such as the Yas Mall in Yas Island, Abu Dhabi, the report said.
• Sheikh Mohammad launches Mohammad Bin Rashid City project website: AED 21 billion expected for sales of promising property projects. • Turkey woos Gulf nationals as property investors: Turkey has changed its law to facilitate property investments by Gulf nationals, allowing them to buy properties with their passports only and offering a oneyear residency permit to foreign investors and their families. • Damac Tower by Paramount, sales reach over AED 1 billion: Buyers from 32 countries including Russia, China, the United States and the United Kingdom have bought units.
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Latest from the economy
UAE steadily heading towards knowledge based economy The UAE is steadily heading towards a knowledgebased economy, prompted by diversification and development of capabilities in alignment with the vision of the President, His Highness Shaikh Khalifa Bin Zayed Al Nahyan, said Sultan Al Mansouri, the minister of economy. The knowledge-based economy will contribute 5 per cent to the UAE’s gross domestic product (GDP) by 2021. Al Mansouri recently called to develop a unified GCC strategy to formulate and maximize performance and well-being in knowledge-based economies. Pointing to the important role of knowledge and technology in driving productivity and economic growth, he said, “Investments in research and development, education and training and new managerial work structures are key” to growth in high-technology investments, hightechnology industries, more highly-skilled labor and associated productivity gains. 8
He also stressed on the fact that the transformation to a knowledge-based economy must start with the educational system by improving the traditional input indicators of R&D (research and development) expenditures and research personnel. Fostering knowledge networks, encouraging national innovation systems and the development of human capital are the main factors required in the transformation process towards a knowledge-based economy, Al Mansouri said.
Dubai repays AED 3.34 billion bonds Dubai has repaid debt worth AED 3.34 billion that came due in April, as per the Dubai Government’s media office. The redeemed bonds were issued under its AED 15 billion medium-term note program in April 2008. Upon maturity, all the outstanding notes were redeemed in full by making the required payment through the paying agent to the holders of all outstanding notes, along with accrued interest, the statement said.
Valoran Real Estate Brokers Issue No. 6 - June 2013
“This repayment reaffirms Dubai Government’s commitment to deal with its repayment obligations in a proactive manner. It also strengthens the government’s resolve to honor all its financial obligations on time,” Abdulrahman Al Saleh, director general of Dubai’s department of finance, said in the statement. The Emirate’s economy is charting a recovery now, boosted by stronger trade and tourism. There are also signs of a revival in its property market as Dubai benefits from its safe haven status amid political unrest elsewhere in the region.
Dubai World Central secures AED 24.5b investment Dubai World Central has so far secured AED 24.5 billion investment while a further AED 500 million is being pumped in by Emirates airline to develop its pilot and cabin crew training facility at its Aviation City cluster. Once completed, the Dubai World Central (DWC)-project worth AED 120 billion, will help aviation and tourism sectors to contribute $45 billion annual revenue to Dubai’s economy.
Dubai Expo 2020 would support 277,000 jobs A recent report on economic impact of Expo 2020 by Oxford Economics shows that Dubai Expo 2020 would support over 277,000 jobs. The report said a total of 77,149 jobs would be created between 2013 and 2021, 40 per cent of which would be within the travel and tourism sector. The report estimates that 90 per cent of the projected 277,149 employment opportunities would occur from 2018 to 2021 with the ramp up to Expo 2020 and the demand generated by the 25 million expected visitors. Of this 90 per cent, 147,000 jobs would be created in the travel and tourism sector, indicating the significant potential
to convert a high percentage into permanent jobs to serve the expanded economy in the post-Expo period. Importantly, the report demonstrates the positive impact for the wider region showing that for every Expo employee approximately 60 additional jobs will be sustained across other parts of the MENA economy.
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Dubai Freehold Property Palm Jumeriah The Palm Jumeirah is an artificial archipelago created using land reclamation by Nakheel, a company owned by the Dubai government in United Arab Emirates and was designed and developed by HHCP architects. The Palm Jumeirah is the smallest and the original of three Palm Islands planned by Nakheel. It is located on the Jumeirah coastal area of the Emirate of Dubai, in the United Arab Emirates (UAE). Following a number of years of feasibility studies, the Palm Jumeirah was launched in 2001, with reclamation starting in the same year. From the end of 2006, the island’s first residences – comprising 4,000 luxury villas and apartments were handed over during a phased period. Moreover, the tourism, leisure and retail elements
of the island are also developed. It is comprised of a two kilometer long trunk, a crown made up of 17 fronds and a surrounding crescent. Palm Jumeriah Properties include world class apartments along the shore, customized signature villas as well as garden villas and Town homes offering beautiful views of the beaches. The facility of having your own swimming pool in a beachside residence is a real treat. Living with celebrities who have bought accommodation in Palm Jumeriah has made it the most desired property destination of Dubai. The Palm Jumeriah shoreline offers significant beach side to its residents. It’s a marvel of modern engineering and offers luxurious living in water with all the amenities and conveniences one can imagine. It has been divided in three portions The Trunk, The Fronds and the Crescent. Palm Jumeirah, Dubai, United Arab Emirates
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Valoran Real Estate Brokers Issue No. 6 - June 2013
Palm Jumeriah Properties
- Grand Foyer ll: 5 bedroom with 6,000 square feet (3 story)
The Palm Jumeriah contains Signature Villas, Garden Villas, Boutique Hotels, Beachside Apartment Buildings, Canal Cove Town Homes, Restaurants, Cafes, Shopping Outlets and Sandy Beaches and marinas.
Town Homes: The Town homes are two story residences in Canal Cove Arabic style offering 3 and 4 bedrooms with 3800 square feet.
Palm Jumeriah Developments The Trunk: The Trunk offers excellent Palm Jumeriah apartments and homes, world class hotels, beachside living, cafes and restaurants. The main attractions at the trunk are Tiara Residences, Oceana, Shoreline Apartments, Marina Residences, IGY Anchor Marina, The Golden Mile, The Fairmont Palm Hotel & Resort, Trump International Hotel and Tower, and The Fairmont Palm Residence. The Crescent: The Island is surrounded by an 11 km crescent. It gives a splendid breakwater to the Fronds and the Trunk. It is a unique destination which has become very famous among the tourists. The Crescent features Royal Amwaj, Atlantis, The Taj Exotica Resort and Spa, Kempinski Hotel Emerald Palace Dubai, The Palm, Royal Amwaj, Kingdom of Sheba, Jumeirah Al Fattan Palm Resort and The Grandeur Residences.
Signature Villas: The signature Villas are two story developments in Arabic, European, Caribbean, Italian, Floridian, Ranch, New Mexican, Bali, and Contemporary styles. The Signature Villas feature: • • • • • • • • • •
Garden Lobby: 5 bedroom Grand Staircase: 5 bedroom Central Gallery: 5 bedroom Gallery Views: 6 bedroom Great Rotunda: 5 bedroom Grand Courtyard: 6 bedroom Grand Majilis: 7 bedroom Central Pool: 6 bedroom Reviera: 5 bedroom Unit Sizes: 7,000 square feet
The Fronds: The Fronds offer unique beachside living with spectacular views of the seaside. It also has the access to the Monorail and the subsea tunnel linking the other parts of the development to it. The Fronds feature excellent Palm Jumeriah villas and homes which include: Garden Homes: The Garden homes are two story homes in Arabic, Greek, Mediterranean and Santa Fe styles and offer: - Central Rotunda: 4 bedroom with 5,000 square feet - Garden Gallery: 3 bedroom with 5,000 square feet - Atrium Entry: 4 bedroom with 5,000 square feet - Atrium Entry ll: 4 bedroom with 6,000 square feet (3 story) - Grand Foyer: 4 bedroom with 5,000 square feet Palm Jumeirah, Dubai, United Arab Emirates www.valoran.ae
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International Property Markets Turkey “Yurtta Barış, Dünyada Barış”
The Turkish market is currently one of the most talked about sectors in the property world. Research from GYODER (Turkey association of real estate investment companies) shows that, overall, new home prices grew by just over 12% in 2012. Recent changes have eased restrictions on foreign ownership of Turkish real estate, as the government seeks to court international capital and transform Istanbul into a regional financial centre. It is further estimated that the change will boost investment in real estate by $5 billion a year.
•
Office occupier demand remains still strong during 2013 with an increasing number of multinational firms establishing offices in Istanbul.
•
The Jones Lang LaSalle survey of European supply chain managers reveals Turkey at the top of markets, expecting it to be the next emerging logistics location.
Highlights •
Turkey secured its first investment-grade credit rating by Fitch Ratings.
•
Due to the fact that Turkey is an earthquake zone, the government has started the biggest urban regeneration project to demolish 6.5 million buildings.
•
New projects in Istanbul such as the new airport, 3rd Bridge on the Bosphorus etc. are expected to change the future outlook of the city. Moreover, Turkey is a prospect for the Olympic Games 2020, if selected it will boost up the property sector.
•
The confidence of global investors in the Turkish retail market is led by the investment of Blackstone and GIC. Turkey Flag
12
“This analysis has been done prior to recent unrest in Turkey and it’s potential effect on the market has not been considered.”
Valoran Real Estate Brokers Issue No. 6 - June 2013
Retail Property Market The general trend among most retailers in 2012 was a more cautious approach to their expansion plans by demanding smaller-scale stores. The main reason for such a trend is the increasing importance of unit efficiency by minimizing operational costs. Additionally, the fast emergence of e-commerce has been another factor for downsizing, especially regarding home decoration and electronics retailers. During 2012, retailer demand both for shopping centres and high street stores was strong. Major players in the retail market, such as LC Waikiki, Defacto, Joker, Koton and Mavi, continued with their aggressive expansion strategies. Teknosa and MediaMarkt are among the rapidly growing anchor brands. MediaMarkt announced plans to open fifteen more stores in 2013 to expand its market share in Turkey. While Darty and Electroworld are among the more prudent expanders, Carrefour reshaped its expansion strategy, demanding space as a supporting retail offer to office and residential developments. In line with the current strong retail market performance, the Turkish retail market has remained on the radar of international brands. The Spanish ready-to-wear brand Shana, the French ready-to-wear brand Promod and the American casual-wear brand Aeropostale are major examples of international brands that recently entered the market. The prime rent for shopping centers has remained constant at EUR 80 per sq.m/month since Q1 2011. The increasing demand of retailers does not directly reflect on the prime rent due to the strengthening competition which stems from the increased supply and the rising sensitivity of retailers for efficiency. The shopping centre prime rent is projected to hover around EUR 80 per sq.m/ month without any significant increase during 2013.
The shopping centre prime rent is projected to hover around EUR 80 per sq.m/month without any significant increase during 2013.
Moreover, the prime rent on high streets rose notably because of the lack of available space and
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the constantly increasing demand. The prime rent, which was recorded at EUR 175 on İstiklal and Bağdat Streets since H1 2011, increased by EUR 25 during H2 2012 and reached EUR 200 per sq.m/ month. Meanwhile, the prime rent in Nişantaşı increased by EUR 20 during the same period, reaching EUR 190 per sq.m/ month, slightly below Bağdat and İstiklal Streets. As at the end of 2012, the total shopping centre gross leasable area (GLA) in Turkey reached 8.6 million sq.m in 337 centers, with an increase of 800,000 sq.m in 27 shopping centers compared to end-2011. 11 of these centers, which account for 44% of the total stock, are located in Istanbul.
Istanbul, Turkey
Shopping Centre Development: GLA & Unit 450
12,000,000
400
10,000,000
350 300
8,000,000
250
6,000,000
200 150
4,000,000
100
2,000,000
Pipeline Stock (sq m)
Existing Stock (sq m)
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
0
50 0
Unit Source: Jomes Lang LaSalle
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Valoran Real Estate Brokers Issue No. 6 - June 2013
Office Property Market Occupier demand for Istanbul remained strong during Q1 2013, driven by high levels of activity from multinational as well as domestic occupiers. Demand has been especially strong for Grade ‘A’ office buildings with efficient design and infrastructure. Take-up during Q1 reached 45,000 sq.m where the Asian side (Ümraniye, Kadıköy and Ataşehir) accounted for more than 50% of total take up, potentially also driven by the plans for the new Financial District in the vicinity. Major transactions included 8,500 sq.m taken by Covidien in Akkom Plaza in Ümraniye, 14,000 sq.m taken by Bosch in the Ronesans Küçükyalı scheme in Maltepe and Avon taking 3,500 sq.m in Tekfen Ofispark in Kağıthane. Strong occupier demand for prime assets, combined with limited availability of prime stock, has led to landlord friendly environment in the CBD were rents increased to EUR 35 / sq.m per month from EUR 30 / sq.m per month. Overall vacancy rates in Q1 decreased compared to last quarter, from 9.4% to 7.2%, given high occupier activity, particularly on the Non CBD Europe, where vacancy rates surpassed the vacancy recorded on the Asian side.
Vacancy in the CBD decreased slightly from 4.5% to 4.2% over the quarter. Despite the very strong demand for prime assets in CBD, there is also significant amount of out-dated stock which occupiers are not willing to commit to. Major recent completions during Q1 2013 included the Papirus Plaza (40,000 sq.m ) in Kağıthane and the B Block of Ofisim Istanbul in Maltepe ( 20,000 sq.m). However, the pipeline remains strong: At current, approximately 1.2 million sq.m of office stock is currently under construction and is expected to be completed by the end of 2015. The development pipeline is almost equally balanced in the three markets i.e. CBD, Non-CBD Europe and Asia. Ataşehir on the Asian side, Kağıthane on the NonCBD Europe side and Levent in the CBD are the noteworthy sub-markets with significant pipeline supply. Given the high levels of supply, the balance of power is more likely to move towards occupiers near end of 2013. The office market has increasingly become an attractive sector for global investors/developers and this demand continued in 2013. However, the dominant market practice of strata sale is a major barrier. Prime yields remained stable at 7.00%.
View of sunset - Istanbul, Turkey
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Residential Property Market Housing Market in Turkey is driven by demand, fueled by a combination of factors like population growth, ongoing migration, increasing urbanization, disposable income growth and affordable financing causing a demand for new housing to escalate sharply and supply the driven market. Annual housing demand is estimated to be approximately 650,000 dwellings.
Rent (EUR)
Prime Rent (psm pa)
Quarterly Rental Growth*
18
425
16 14
400
12 10
375
8 6
350
4 2
Rental Growth
0113
0412
0312
0212
0112
0311
0211
0111
0410
0310
0210
0110
325
0
Prime Rent Source: IHS Global Insight
Sales Price Index The residential sales prices for existing homes increased 0.66% in Turkey overall, 0.10% in Adana, 0.28% in Ankara, 0.10% in Antalya, 0.10% in Bursa, 0.87% in Istanbul, 0.74% in Izmir and 0.21% in Kocaeli during April 2013.
Annual % Change in Turkey Composite House Sales Price Index
Annual % Change in Turkey Composite Rent Price Index
20.00%
20.00%
15.005
15.005
10.00%
10.00%
5.00%
5.00%
0.00%
0.00%
-5.00%
-5.00%
-10.00%
-10.00%
-15.00%
-15.00%
-20.00%
-20.00% Apr-08
Apr-09
Apr-10
Apr-11
Apr-12
Apr-13
Source: REIDIN.com
16
Apr-08
Apr-09
Apr-10
Apr-11
Apr-12
Apr-13
Source: REIDIN.com
Valoran Real Estate Brokers Issue No. 6 - June 2013
Rental Price Index The residential rental prices for existing homes increased 0.30% in Turkey overall, 0.52% in Adana, 0.20% in Ankara, 0.40% in Bursa and 0.47% in Istanbul. Prices decreased 0.20% in Antalya and 1.05% in Kocaeli. Prices were constant in Izmir during April 2013.
New Home Price Index In April 2013 there was a 0.31% increase with respect to the previous month and in compliance with April 2012 there was a 7.99% increase. The “Trademarked Projects”, in Istanbul’s European side shows 0.37% increase and 0.28% increase in the Asian side. There is an increase of 0.23% in 1+1 flat type; increase of 0.68% in 2+1 flat type; increase of 0.16% in 3+1 flat type and increase of 0.08% in 4+1 flat type with respect to the previous month. It is further revealed that there is 0.55% increase in 51-75sqm size; 1.05% increase in 76-100sqm; 0.23% increase in 101125sqm size; 0.24% increase in 126-150sqm and 0.08% increase in 151sqm and bigger sized properties with respect to the previous month.
Monthly % Change in Turkey Composite House Sales Price Index
Monthly % Change in Turkey Composite Rent Index
3.00%
3.00%
2.00%
2.00%
1.00%
1.00%
0.00%
0.00%
-1.00%
-1.00%
-2.00%
-2.00%
-3.00%
Apr-08
Apr-09
Apr-10
Apr-11
Apr-12
Apr-13
-3.00%
Apr-08
Apr-09
Apr-10
Apr-11
Apr-12
Source: REIDIN.com
Turkey Composite House Sale Price Index (June 2007=100)
Turkey Composite Rent Index (June 2007=100)
125
125
120
120
115
115
110
110
105
105
100
100
95
95
90
90
85
85
80 75
Apr-13
Source: REIDIN.com
80 Apr-08
Apr-09
Apr-10
Apr-11
Apr-12
Apr-13
Source: REIDIN.com
75
Apr-08
Apr-09
Apr-10
Apr-11
Apr-12
Apr-13
Source: REIDIN.com
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Real Estate Investing Lesson 5
Get the money to start the game of Real Estate (Part I) For many people, the trouble with real estate investing is that they lack the access to cash for the down payment. The old adage that “it takes money to make money” is generally true in our experience. So how do you get started in real estate if you do not want to own distressed properties in the worst neighborhoods, and you don’t have a six-figure balance in your checking account to pay top dollar in the best neighborhoods? You muster all the patience you can and embrace a long-term vision. You don’t have to be wealthy or have great savings to begin making attractive real estate investments.
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Valoran Real Estate Brokers Issue No. 6 - June 2013
Determining what you need to get started Most of the time, real estate investors make a down payment and borrow the majority of the money needed to complete a purchase. That is the conventional way to purchase real estate investment properties and will be the most successful method for you in the long run. In order to qualify for the most attractive financing, lenders typically require that your down payment be at least 20 percent of the property’s purchase price. The best investment property loans sometimes require 25 to 30 percent down payment for the most favorable terms. Lenders tend to be more conservative and require larger down payments during periods of falling real estate prices such as most areas experienced in the late-2000s. For most residential investment properties, such as single-family homes, attached housing such as condos, town homes, and small apartment buildings of up to four units, you can get access to the best financing terms by making at least a 20 to 25 percent down payment. (Mortgages on non owner-occupied property tend to be 1/4 to 1/2 percent higher). You may be able to make smaller down payments (as low as 10 percent or less), but you will pay much higher interest rates and loan fees, including private mortgage insurance.
Overcoming Down Payment Limitations
Determining how much cash you need to close on a purchase is largely a function of the estimated purchase price. Suppose you’re looking to buy some modest residential housing for AED 1,000,000. For a 25 percent down payment you need AED 250,000, and adding in another 5 percent for closing costs brings you to AED50,000. If you have your heart set on buying a property that costs three times as much (AED 3,000,000 sticker price), you need to triple these amounts to a total of about AED 900,000 for the best financing options.
Most people, especially when they make their first real estate purchase, are strapped for cash. If you do not have 20-plus percent of the purchase price, do not panic and do not get depressed - you can still own real estate. We have got some solutions - you can either change your approach, allowing you more time to save or lowering your entry fees, or you can seek other sources of funding. In the following section, we lay out your options:
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Changing your approach Some ways you can alter your approach without having to find money elsewhere are as follows: (It should be, however, noted that the following approaches may not be directly related to the Dubai Real Estate property. Kindly seek advice from your real estate agent for further details.) Seek low money down loans with private mortgage insurance: Some lenders may offer you a mortgage even though you may be able to put down only 10 percent of the purchase price. These lenders will likely require you to purchase private mortgage insurance (PMI) for your loan. This insurance generally costs several hundred AED per year and protects the lender if you default on your loan. (When you do have at least 20 percent or higher equity in the property, you can generally eliminate the PMI.)
interim, a portion of your monthly rental payment goes toward the future purchase price. If you can find a seller willing to provide financing, you can keep your down payment to a minimum.
Tapping into other common cash sources Saving money from your monthly earnings will probably be the foundation for your real estate investing program. However, you may have access to other financial resources for down payments.
Delay your gratification: If you do not want the cost and strain of extra fees and bad mortgage terms, postpone your purchase. Boost your savings rate. Examine your current spending habits and plan to build up a nest egg to use to invest in your first rental. Often real estate investors get started by actually buying a new home and simply keeping their old home as a rental. Think smaller: Consider lower-priced properties. Smaller properties and ones that need some work can help keep down the purchase price and the required down payment. For example, a duplex where you live in one unit and rent out the other is also a cost-effective way to get started. Turn to low entry cost options: For the ultimate in low entry costs, real estate investment trusts (REITs) are best. These stock exchange traded securities (which can also be bought through REIT-focused mutual funds) can be bought into for several thousand Dirhams or less. Lease options represent another low cost (although more complicated) opportunity. With these, you begin by renting a property you may be interested in purchasing down the road. In the
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Borrowing against home equity Saving money from your monthly earnings will probably be the foundation for your real estate investing program. However, you may have access to other financial resources for down payments. Most real estate investors that we know began building their real estate portfolio after they bought their own home. Conservatively tapping into your home’s equity may be a good down payment source for your property investments.
Valoran Real Estate Brokers Issue No. 6 - June 2013
You can generally obtain mortgage money at a lower interest rate on your home than you can on investment property. The smaller the risk to the lender, the lower its required return — and thus, the better rates for you as the borrower. Lenders view rental property as a higher risk proposition and for good reason: They know that when finances go downhill and the going gets really tough, people pay their home mortgage to avoid losing the roof over their heads before they pay debts on a rental property. Unless your current mortgage was locked in at lower rates than are available today, we generally recommend refinancing the first loan and freeing up equity that way versus taking out a home equity loan or line of credit. A variation on the borrowing-against-homeequity idea uses the keep-your original-home-asa-rental strategy. You build up significant equity in your owner-occupied home and then need or want a new home. Refinance the existing home (while you still live there, for the best owneroccupied rates) and then convert it into a rental. Take the tax-free proceeds from the refinance and use that as the down payment on your new owneroccupied home. Before you go running out to borrow to the maximum against your home, be sure that you: •
Can handle the larger payments: We don’t recommend borrowing more than the value of your home, as you may be enticed to do with some of the loan programs that pitch borrowing upwards of 125 percent of the value of your home. This excessive leveraging is dangerous and could come back to haunt you!
•
Fully comprehend the risks of losing your home to foreclosure: The more you borrow against your home, the greater the risk that you may lose the roof over your head to foreclosure should you not be able to make your mortgage payments. That’s exactly what happened to too many folks during the late2000s real estate market decline.
Moving financial investments into property investments As you gain more comfort and confidence as a real estate investor, you may want to redirect some of your money from other investments like stocks, bonds, and mutual funds into property. Keep in mind one mantra-Diversification: Real estate is one of the prime investments (the others being stocks and small business) for longterm appreciation potential. Be sure that you understand your portfolio’s overall asset allocation and risk when making changes.
Separating investments from cash value life insurance You may own a cash value life insurance policy one that combines a life insurance death benefit with a savings type account in which some money accumulates and on which interest is paid. In addition to being a costly cash drain with its relatively high premiums, cash value life insurance investment returns tend to be mediocre to dismal. You are best off separating your life insurance purchases from your investing. If you need life insurance (because others are dependent on your income), buy a term life policy, which is pure, unadulterated life insurance. But do not cancel your current cash value policies before replacing them with term if you do indeed need life insurance protection.
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Properties of the month The Lakes
Hattan 2
Emirates Living
Tanaro
RE
NT
NT
RE
Price (AED)
Selling : 14 ,000,000 - Rental : 475,000
Price (AED)
145,000
Number of Bedroom(s)
6
Number of Bedroom(s)
2
View
Lake and Park
View
Golf Course & Lake View
BUA (in Sq.ft.)
Plot : 8,124 sqft & BUA : 6,124 sqft
BUA (in Sq.ft.)
1,364
Reference Number
VI1088
Reference Number
AP1096
Agent Name
Mia
Agent Name
Mia
Contact Number
055 227 5515
Contact Number
055 227 5515
Down Town Burj Dubai
Burj Views B
JLT
Palladium
NT
RE
NT RE
Price (AED)
80,000
Price (AED)
100,000 - 1 CHQ
Number of Bedroom(s)
1
Number of Bedroom(s)
2
View
Business Bay View
View
Lake and Sheikh Zayed Road View
BUA (in Sq.ft.)
727
BUA (in Sq.ft.)
1,187
Reference Number
AP1101
Reference Number
AP1107
Agent Name
Mia
Agent Name
Mia
Contact Number
055 227 5515
Contact Number
055 2275515
22
Valoran Real Estate Brokers Issue No. 6 - June 2013
JLT
Indigo Tower
Dubai Marina
Elite Residence
RE
NT
NT
RE
Price (AED)
80,000 - 2 CHQ
Price (AED)
110,000 – 125,000
Number of Bedroom(s)
1
Number of Bedroom(s)
2 ( Total of 4 units )
View
Lake and Sheikh Zayed Road View
View
Partial and Marina View
BUA (in Sq.ft.)
787
BUA (in Sq.ft.)
1,329.34
Reference Number
AP1108
Reference Number
AP1005
Agent Name
Mia
Agent Name
Alex
Contact Number
055 2275515
Contact Number
055 5075020
Dubai Marina
Elite Residence
Rimal 1
JBR
NT
RE
NT
RE
Price (AED)
110,000
Price (AED)
120,000
Number of Bedroom(s)
1
Number of Bedroom(s)
2
View
Partial Sea View
View
Marina View
BUA (in Sq.ft.)
960.46
BUA (in Sq.ft.)
1,300
Reference Number
AP1062
Reference Number
AP1106
Agent Name
Alex
Agent Name
Alex
Contact Number
055 5075020
Contact Number
055 5075020
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Properties of the month The Lakes
Deema 3
Mediterranean Cluster 9
Jumeirah Islands
RE
NT
NT
RE
Price (AED)
285,000
Price (AED)
360,000
Number of Bedroom(s)
4
Number of Bedroom(s)
4
View
Lake View
View
Lake View
BUA (in Sq.ft.)
4,500
BUA (in Sq.ft.)
5,338
Reference Number
VI1100
Reference Number
VI1093
Agent Name
Mehdi
Agent Name
Mehdi
Contact Number
055 5075040
Contact Number
055 5075040
Marina Promenade, Tower X1
Dubai Marina
Springs 8
Emirates Living
LE
NT
SA
RE
Price (AED)
120,000
Price (AED)
2,750,000
Number of Bedroom(s)
1
Number of Bedroom(s)
3 + Study (Type 3E)
View
Partial Sea View
View
Lake View
BUA (in Sq.ft.)
980
BUA (in Sq.ft.)
2,246
Reference Number
AP1109
Reference Number
VI813
Agent Name
Mehdi
Agent Name
Alex
Contact Number
055 5075040
Contact Number
055 5075020
24
Valoran Real Estate Brokers Issue No. 6 - June 2013
The Palm Jumeirah
Al Sarood
Al Furjan
Quortaj
L SA
E
E
L SA
Price (AED)
2,750,000
Price (AED)
3,700,000
Number of Bedroom(s)
3
Number of Bedroom(s)
3
View
Normal
View
Normal
BUA (in Sq.ft.)
2,000
BUA (in Sq.ft.)
6,500
Reference Number
AP1092
Reference Number
VI1078
Agent Name
Mehdi
Agent Name
Mehdi
Contact Number
055 5075040
Contact Number
055 5075040
Business Bay
Business Tower
Elite Residence
Dubai Marina
LE
SA
LE
SA
Price (AED)
1,050,000
Price (AED)
1,850,000
Number of Bedroom(s)
Office Space
Number of Bedroom(s)
2
View
Normal
View
Partial Sea View
BUA (in Sq.ft.)
1,214
BUA (in Sq.ft.)
1,330.52
Reference Number
OF1086
Reference Number
AP895
Agent Name
Mehdi
Agent Name
Alex
Contact Number
055 5075040
Contact Number
055 5075020
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Properties of the month Dubai Marina
Princess Tower
Down Town Burj Dubai
Burj Views A
L SA
E
E
L SA
Price (AED)
3,200,000
Price (AED)
2,400,000
Number of Bedroom(s)
3
Number of Bedroom(s)
2
View
Sea View
View
Burj Khalifa View
BUA (in Sq.ft.)
1,998.75
BUA (in Sq.ft.)
1,249
Reference Number
AP1010
Reference Number
AP1074
Agent Name
Alex
Agent Name
Mia
Contact Number
055 5075020
Contact Number
055 227 5515
Al Barsha
Barsha 2
Springs 7
Emirates Living
LE
SA
LE
SA
Price (AED)
13,500,000
Price (AED)
1,950,000
Number of Bedroom(s)
5
Number of Bedroom(s)
2 + Study
View
Road View
View
Partial Lake View
BUA (in Sq.ft.)
7,500
BUA (in Sq.ft.)
1,690
Reference Number
VI1083
Reference Number
VI931
Agent Name
Mia
Agent Name
Mia
Contact Number
055 227 5515
Contact Number
055 227 5515
26
Valoran Real Estate Brokers Issue No. 6 - June 2013
TWO TOWERS Building Features: • • • • • •
SPECIAL OFFER
Two residential towers with a shared courtyard Gymnasium & Swimming Pool with outdoor terrace area and landscaped sun deck Three level secure basement parking with single point access Vehicle drop off point at building entrance lobby Round the clock advanced security system Proximity to Metro Station and world class Shopping Malls
Apartment Features:
Unique and modern spacious 1B/R and 2B/R apartments available in Two Towers - Tecom, graced with contemporary European fittings, perfectly suited to accommodate premium lifestyle in Dubai. Two Towers provide its residents easy access to business hubs such as Dubai Media City and Knowledge Village as well as areas such as Palm Jumeirah and Dubai Marina, Mall of the Emirates and Ibn Battuta mall. You’ll find you’re never too far from work, play, or rest and direct access to Al Khail Road and Sheikh Zayed Road make it easy to reach places farther afield.
• • • • • • •
Huge balconies offering panoramic views High ceilings Solid marble, Slate and Parquet Flooring Italian Wardrobes and Kitchen Cabinets German Quality White Goods Energy efficient Central water heating system – resulting in substantial savings in electricity bills Centralized Air Conditioning from on-site Chillers – again resulting in huge savings.
Prices start from AED 1,375,000 for 1 B/R and AED 1,800,000 for 2 B/R apartments with financing option for 10 years.
Community
Tecom -Barsha
Tecom - Barsha
Property Name
Two Towers
Two Towers
Price (AED)
1,375,000
1,800,000
Number of Bedroom(s)
1
2
BUA (in Sq.ft.)
1,318
1,745
Reference Number
AP1123
AP1124
Contact Number
04 33 22248
04 33 22248
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T W O
T O W E R S
O NE B EDRO O M F L O O R P L A N
LAUNDRY
LIVI NG/DI NING ROOM KITCH EN
EN TRANCE
GU EST BEDROOM
EN S. 1
2
TYPICAL FLOORS: 3RD TO 21ST
1
3
6
UNITS 3 & 6: 1 BEDROOM APARTMENT UNITS: 1, 2, 4 & 5: 2 BEDROOM APARTMENT 4
28
5
Valoran Real Estate Brokers Issue No. 6 - June 2013
T W O
T O W E R S
T WO BEDRO O M F L O O R P L A N
KITC H E N L IV ING/DI NING RO O M
E NT RANC E
GUE ST
LAUNDRY
BE DRO O M II
E NS. II
B EDRO O M
E NS. I
2
1
3
6
TYPICAL FLOORS: 3RD TO 21ST UNITS 3 & 6: 1 BEDROOM APARTMENT UNITS: 1, 2, 4 & 5: 2 BEDROOM APARTMENT 4
5
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FAC T S SH E E T O N E - B E D R O O M
A N D
T W O - B E D R O O M
BEDROOM L AY O U T
D E T A I L S
BATHROOMS AND GUEST TOILETS Spacious room with balcony Open outside view Floor to ceiling windows Sliding door “tilt and slide”, Italian mechanism
F L O O R I N G Semi-Solid Oak Parket W A R D R O B E Italian S design and manufacturing
S A N I T A R Y Duravit - UK design and manufacturing MIXERS
LIVING ROOM/ DINING ROOM Spacious room with balcony Perfect distributionof areas Dining and living areas close to window Floor to ceiling windows. Sliding door “tilt and slide”, Italian mechanism F L O O R I N G Semi-Solid Oak Parket L I G H T I N G European design
B U I L D I N G
Grohe - German design and Manufaturing
F L O O R I N G Beautiful Marble
LAUNDRY C A B I N E T S Functional furnished. Italian design and manufacturing E LE CT RI CAL TEKA, German design A PPLI A NCE S German and Spain manufacturing Includes: washing machine and dryer machine, column installation
ACC E S S ORIE SAssorted mirrors, stainless steel functional, design accesories
L I G H T I N G European design
L AY O U T:
A P A R T M E N T
Wall design marble mosaic
KITCHEN
BALCONY
F L O O R I N G Black Slate / Mosaic slate
F L O O R I N G Porcelain tiles
C A B I N E T S Fully furnished. Italian design and manufacturing E LE C T R IC AL TEKA, German design A P PLIA NCE S German and Spain manufacturing Includes: electrical oven, hood, touch electrical hoob, waste dispenser, dishwasher*, Mitsubishi fridge and freezer
D E T A I L S
AMENITIES
LIFT LOBBIES
Building controlled entrance
F LO O R I N G
Fitness center
Black slate / Marble
Spa Swimmingpool Shopping center and restaurants in the Podium DU provider
AIR CONDITIONING SYSTEM C H IL LE R S Carrier - Europe design and manufacturing
E LE C T R I C AL Switches and sockets ABB - UK manufaturing
F A N C O IL UN I T S ( FC U) Carrier - Europe design and manufacturing
F R E S H AI R HA N DL I N G UN I T S Carrier - Europe design and manufacturing
GARAGE
LIFTS
Each apartment has covered parking space in the basement
Mitsubishi, highspeed
STO R AG E
6 lifts: 3 units per tower, dedicated to tenants
Available in the basement area for tenants*
2 lifts dedicated to podium
* Some exceptions
30
The above mentioned specifications could be modified due to technical reasons without prior notice
Valoran Real Estate Brokers Issue No. 6 - June 2013
VALORAN REAL ESTATE
Your Lifestyle Broker
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