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Last month at a glance: • UAE banks seek more room for real estate loans • Real estate in UAE seen to offer good affordability • Overall business confidence ‘most stable’ in UAE

Issue No. 3 - Mar 2013

Dubai Real Estate - Fundamental Analysis Residential & Commercial Markets

Dubai Freehold Property Emirates Living: ‘The address of comfortable luxury’ The Springs and the Meadows

International Property Markets United Kingdom- When will the economy recover? Prime Central London

Healthy Investment Tips Lesson 2: Common Real Estate Investment

Property of the month Prepared by: Mo. Asadian

VALORAN MEMBER

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Valoran Real Estate Brokers Issue No. 3 - Mar 2013

News Digest: Last month at a glance UAE banks seek more room for real estate loans Banks in the United Arab Emirates have asked the Central Bank for permission to free up more money for the real estate and construction industries as they seek to revive credit growth in the second-biggest Arab economy. The Emirates Banks Association, which includes HSBC Holdings and National Bank of Abu Dhabi (NBAD), is recommending that the regulator exclude mortgage loans from the category of credit extended to other real estate projects. Proposals also include raising the ratio of deposits, banks can lend to real estate to 20 percent. The push comes after banks lobbied to renegotiate curbs on mortgage lending introduced in December as they seek to spur a recovery in credit

growth, four years after Dubai property prices crashed amid the global financial crisis. Loans and advances rose 3.1 per cent in the year to November 2012, compared with 15 per cent in neighboring Saudi Arabia. Interbank lending rates fell to the lowest level since Bloomberg started tracking the data in 2006. As per current rules, default risk, loans made to finance infrastructure projects to build airports; roads; bridges as well as home purchases fall under the real estate category. The rule was introduced to curb default risk after one in every six loans signed before the Dubai real estate crash wound up classified as non-performing.

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Valoran Real Estate Brokers Issue No. 3 - Mar 2013

Real estate in UAE seen to offer good affordability As per the Emirates NBD Wealth Management, Investors should re-balance portfolios in 2013 away from fixed income to take advantage of better returns in other asset classes, including equities, commodities and real estate. Investors should also look closely at alternative asset classes. Real estate in the UAE continues to offer good affordability while demand is seen rising, particularly in apartment and commercial sectors. They need to run a balanced portfolio of multiple asset classes and geographies in 2013. Emerging market equities and commodities are preferred to US and European fixed income securities. Looking at world markets, investment opportunities in equities and commodities across the globe; including MENA, are favored which yields high dividend equities over fixed income.

Overall business confidence ‘most stable’ in UAE Overall business confidence remained the most stable in the UAE despite a recent decline in sentiments across the region, a new survey revealed. The report on stable business confidence levels in the UAE comes in the backdrop of a survey by global information and insights company Nielsen, showing a global dip in consumer confidence at the end of last year. According to the index, UAE firms demonstrated a higher level of confidence in the availability of internal financing sources than Saudi Arabia, particularly in equity from internal sources (45 per cent vs 33 per cent). Respondents in Saudi Arabia revealed more confidence in equity from institutional finance than those in the UAE (24 per cent vs 18 per cent, respectively). Business confidence across all countries in the GCC dropped in the fourth quarter, with the largest drop in Saudi Arabia (-6.86 points) and Bahrain (-6.72 points), the survey showed. 4

In the UAE, despite witnessing a decline of 0.60 points, overall business confidence remained the most stable in the country.

Other ‘Headlines in brief’ • UAE set to pass companies law early March • All areas of Dubai reported property price rises in 2012 : www.thefirstgroup.com • Buyers eye stake in Dubai-backed Vegas casino • In debt Nakheel tenders for new Palm projects • Real estate stocks give Dubai a lift; Abu Dhabi up


Valoran Real Estate Brokers Issue No. 3 - Mar 2013

Dubai Real Estate Fundamental Analysis • Residential leasing activity has picked up significantly in the last six months of 2012, which is reflected in higher occupancy rates in established developments as well as emerging communities. The increased level of enquiries has resulted in a rise in apartment and villa rental rates of 7% and 5% respectively over the last quarter and 17% year on year. In addition, the take-up time of advertised units has declined indicating strong market performance.

Dubai’s real estate market currently consists of 411,500 apartments, 60,400 villas and 9.2 million square meters of office space. Assuming construction schedules are adhered, it is believed 2013 will see 39,000 apartments, 5,400 villas and 1.6 million square meters of office space delivered to the market. Some of the major developments in the real estate sector of Dubai along with the forecasts for the upcoming years are summarized as under:

For the first half of 2013, rents will continue to rise, albeit at a lower rate, on the back of strong demand levels. The price difference between existing long-term tenants and new ones is expected to shrink as existing rents will be more aligned with market rates. In addition, the recent announcement requiring Government employees to live in Abu Dhabi to qualify for housing allowance coupled with increased quality supply and declining rents in the capital, might result in an outflow of Dubai residents who originally commuted between the two emirates. However, the impact on rents will be limited as vacancies caused by the gradual relocations are likely to be absorbed by increased demand.

Residential Markets: After several years of sustained declines, renewed confidence has returned to the residential sector, driven predominantly by increasing activity from cash investors. Dubai continues to dominate the region as the major investment destination with its safe haven status firmly cemented. 2012 witnessed the re-emergence of off-plan sales launches in Dubai, with mixed fortunes for the developers. However, Emaar in particular registered very positive sales for its new schemes in Emirates Living, Downtown and the Arabian Ranches.

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Valoran Real Estate Brokers Issue No. 3 - Mar 2013

• It has been observed that transaction activity and price for residential apartments and villas rose on the back of increased confidence and financing. Sale prices for apartments and villas rose by 9% compared to last quarter while the year on year increase was 14 and 23% respectively. There has been a rise in off-plan sales for projects from reputable developers with attractive payment plans in prime locations.

For the first half of 2013, rents will continue to rise, albeit at a lower rate, on the back of strong demand levels. The price difference between existing long-term tenants and new ones is expected to shrink as existing rents will be more aligned with market rates. In addition, the recent announcement requiring Government employees to live in Abu Dhabi to qualify for housing allowance coupled with increased quality supply and declining rents in the capital, might result in an outflow of Dubai residents who originally commuted between the two emirates. However, the impact on rents will be limited as vacancies caused by the gradual relocations are likely to be absorbed by increased demand.

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Valoran Real Estate Brokers Issue No. 3 - Mar 2013

Commercial (Office) Markets: It has been observed that the tenant demand has been increased towards the end of 2012. However, the office sector is likely to remain stressed during 2013, due to continued supply and demand imbalances caused by the excessive delivery of strata title stock. The highest vacancies are found within locations most impacted by strata title spaces, such as Business Bay and Dubai Silicon Oasis. Sole ownership assets within these areas are currently commanding far loftier rents, whilst also benefiting from superior occupancy rates, highlighting the emergence of a two-tier marketplace.

• In case of commercial leasing, although the number of enquiries increased towards the end of 2012, transaction levels declined. Compared to last quarter, office rental rates remained stable with popular developments such as DIFC experiencing minimal increases. Year on year rates decreased by 4%. It is expected that the inquiries received in the latter half of 2012 to materialize in the first half of 2013 with quality products (fitted office space) being able to attain a 5% to 10% increase from the current rental rates.

Strata title office buildings are still considered unattractive by most large occupiers and corporate tenants, due to the complexities of multiple ownership across the property and the resulting inefficiencies this creates.

• Investment in the office market remained flat throughout the second half of 2012. As a result, sale prices were unchanged compared to Q3 2012 whereas the year on year rates decreased by 3%.

Office stock continues to swell as projects launched during the peak of the cycle enter the market. Close to 600,000 square meters of new stock was delivered during 2012, with the majority of this accommodation within freehold developments.

For the first half of 2013, not much change in the transaction level and prices are as expected. The company law, which is due in March, is expected to revitalize the office sales market in Dubai.

Office Stock Growth

Office Stock (million sqm)

7.5

6.0

4.5

3.0

1.5

0.0

2008

2009

2010

2011

2012 Source: CBRE

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Valoran Real Estate Brokers Issue No. 3 - Mar 2013

Dubai Freehold Property Emirates Living: ‘The address of comfortable luxury’ Emirates Living is conveniently located between two of Dubai’s main arteries, Sheikh Zayed Road and Al Khail Road, opposite Dubai Marina. Access is easy from both sides and on to Emirates Road. Emirates Living is a community located just a short distance from the Dubai Marina, Dubai Media City, Dubai Internet City and Mall of the Emirates. The area is home to the world-class 18-hole Montgomery Golf Club as well as the championship-hosting Emirates Golf Club. Emirates Living consists of various subdevelopments including: Emirates Hills Emirates Hills is a beautiful and luxurious worldclass development consisting of multi-million dollar villas, many of which overlook the lush green fairways of the Montgomery Golf Course. The Lakes The Lakes is a peaceful and scenic community featuring waterways, parks and landscaped greenery. The neighborhood has a community centre, while bicycle pathways around the neighborhood make it a safe place to enjoy cycling. The community is located between the Montgomery Golf Club and the Emirates Golf Club. The Springs The Springs is a development consisting of 14 gated communities, each made up of town houses, scenic waterways and lush landscaping making a perfect environment for young families and couples located within the Emirates Living community, in close proximity to Dubai Media City & Internet City. 8

The Meadows The Meadows has many parks and play areas for children making it another area that is very popular with families. It is identical in its layout to The Springs. The Greens A mid-rise residential complex, The Greens blends affordability with a new lifestyle choice. Combining tasteful design and fitted with the latest in modern conveniences, The Greens is designed to meet the needs of family. The apartments are set in modern buildings positioned to enclose a private courtyard for all residents to enjoy. Each complex of The Greens has a separate entrance lobby, secure underground parking, and gymnasium and shared barbeque facilities. The Views he Views is an exclusive community strategically located on Dubai’s new growth corridor on Sheikh Zayed Road. Located adjacent to The Greens, overlooking waterways and the famous Emirates Golf Club, The Views is a vibrant community enjoying superb aspects. Exquisite Riviera style town houses and apartments are arranged amid landscaped gardens and, whether you choose riverside or clubside, the emphasis is on living in a location which overflows with pleasant outlooks. In this report, we would introduce ‘The Springs’ and ‘The Meadows’, while ‘The Hills’ and ‘The Lakes’ will be discussed in the issue of April 2013.


Valoran Real Estate Brokers Issue No. 3 - Mar 2013

The Springs The Springs is a villa community that offers Dubai property buyers a great choice of space and facilities and is located in the Emirates Living Community with neighboring developments such as Emirates Hills, The Lakes and The Meadows. With great and quick connections to Sheikh Zayed road it offers an easy access to Dubai. The Springs is one of Dubai’s Real Estate’s more affordable options for families or couples who are looking for comfortable villas at a competitive rate. Located in the Emirates Living District, The Springs consists of 15 phases. Each is a gated community with a host of amenities that include swimming pools, lush landscapes and other facilities that suit the immediate needs of its residents. The Springs features town homes with 2 or 3 bedrooms that includes a study and/or maid’s room. Each has a private garden, a covered carport for 2 and balconies that offer soothing views of the lake, the park, the pool or simply your nice and quiet neighborhood. Villas in Dubai are highly in demand, meaning that property investors have a limited choice of where to buy and buyers are facing high prices consequently. The Springs Dubai is a villa community that offers Dubai property buyers a great choice of space and facilities, while still keeping a competitive market price.

The Emirates Living Community, including The Springs villa development is one of the earliest property projects to be released and finished on the entire Dubai property market. A unique concept by flagship freehold real estate developer Emaar, The Springs is part of a community of villa sub-developments that cater to different needs, specifications and budgets, with a whole host of amenities in a peaceful neighborhood. With a choice of three, four and five bedroom houses, and floor space areas ranging from 1,772 square feet to 3,030 square feet, residents also get their own carports for two cars, private gardens and balconies overlooking the landscapes and other picturesque developments. The close proximity of other key freehold developments means that The Springs is in a superb location for other important amenities such as supermarkets and restaurants. The Dubai Marina is just across the road and several five star hotels are also close by. The Mall of the Emirates is also a matter of minutes away by car thanks to the easy access to Sheikh Zayed Road. The heart of Dubai is east to access, so residents can enjoy being outside the busy city, while still being able to get there in ample time.

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Valoran Real Estate Brokers Issue No. 3 - Mar 2013

The Meadows The Meadows is part of ‘Emirates Living Community’ in Dubai that also includes prestigious residential projects like ‘The Springs’, ‘Jumeirah Islands’ and ‘The Greens’. The Meadows premium villa project is a master planned community located next to Emirates-Hills development on Sheikh Zayed Road and is one of a number of real estate projects developed by Emaar.

have been developed with every comfort in mind and feature every modern convenience in a tranquil and luxurious atmosphere, including lush greenery, water features and beautiful streets. Other features include swimming pools, landscaped parks, gyms, play areas, restaurants and cafes, all with exceptional finishes. Unit types and Sizes in The Meadows Unit type

The development forms part of Dubai’s highprofile, which feature the Dubai Marina, Emirates Hills, Dubai Internet City, Media City, the American University in Dubai, beaches, shopping malls and luxury hotels. The villas in The Meadows community range from 3 to 6 bedrooms, and all are surrounded by a manicured garden. The Meadows offer beautiful, spacious villas, each with its own garden and garage. The homes

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Rooms

Size (sq. ft.)

Type 2

4

4018

Type 3

3

3345

Type 4

4

3624

Villa 6

5

3578

Villa 7

6

3805

Villa 8

7

4931

Villa 9

7

4924

Villa 10

5

4207

Villa 11

5

3970

Villa 12

4

4170

Villa 13

5

3998

Villa 14

4

4099

Villa 15

3

3089

Villa 16

5

3687

Executive Villa 1

5

5260

Executive Villa 2

5

4742

Luxury Villa

5

6151


Valoran Real Estate Brokers Issue No. 3 - Mar 2013

International Property Markets United Kingdom- When will the economy recover? Ever since the housing market downturn in Q3 2007, questions have been asked about how far the house price decline would go and how long it would last. There were deeper concerns by early 2008, but this was dismissed as pessimistic by many. Source: Jones Lang LaSalle

END 2012

Hotel

Rental Growth Slowing

Rents Falling

Rental Growth Accelerating

Rents Booming Out

Residential Retail

Office

END 2013

Hotel

Residential

Rental Growth Slowing

Rents Falling

Rental Growth Accelerating

Rents Booming Out

Retail Office

Post-Lehman Brothers crash down– the name alone has come to represent the last gasp of an entire economic cycle – and we continue to renew our surprise at how long and how deep the economic (and housing market) downturn

has been. Surprise should be reserved instead for prolonged house price stagnation, with a relatively flat performance over the past 24 months, having made gains from the depths of the market in 2009. In fact, despite this stagnant performance it is believed there are more reasons to be optimistic than pessimistic in 2013 and over the mediumterm. It has been fore-casted that there would be moderate price improvements of two per cent nationally next year, followed by positive performances of between two and four per cent per annum over the next few years. Prices will be supported by another anemic sales year with around 720,000 transactions, only modestly up from 2012. Activity will be propped up artificially by Government-backed loan schemes that do nothing to satisfy the underlying mortgage market problems, but buy time until a more robust backdrop for mortgage lending can take shape. The rental market is generally more responsive to economic performance and rental properties will remain in high demand. However, the balance of supply in some locations will temper rental growth, creating localized movements in average rents. The quality of supply in the rental market continues to improve and represents a legitimate alternative for many who are either unable to transact in the for-sale market, or the increasing number who see renting as a legitimate alternative to owner-occupation. Government has recognized the importance of a vibrant housing market for the overall health of the UK economy for some time. However, there has not been a coherent strategy that deals with the structural problems in the housing market that were exposed by, or are the result of the market downturn. The mortgage market continues to constrain transactions, which will be at barely half the normal level for a fifth year in 2012, with a similar level expected next year. That is nearly half a million fewer people that would normally have www.valoran.ae


Valoran Real Estate Brokers Issue No. 3 - Mar 2013

moved each year choosing or more likely being forced to stay put – 2.5 million fewer transactions over the course of the downturn. The negative impact on the UK economy is severe, with an equally significant but less quantifiable social impact on frustrated families. In the new build market, delivery means increased volumes of supply from house-builders and developers. Constrained demand at one end, combined with the continued squeeze on construction input costs, has made it challenging to achieve higher rates of construction. The House Builder’s Federation (HBF) estimates that even in a crisis state the housing market contributes 1.5 direct and three indirect jobs for every home completed; it also contributes circa three per cent to UK GDP. No Government drive to support the housing market will make much difference while the macroeconomics remains as uncertain – and unpredictable – as has been the case over the past few years. Uncertainty weakens demand, forcing consumers to delay large expenditures (such as home moves) until there is greater confidence about that expenditure being worthwhile. A year ago, there was conservative optimism that UK PLC was heading for a slow, steady improvement. A double dip later and we are now waiting to see if the released GDP estimates (up

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one per cent according to The Office of National Statistics) are simply the result of an Olympic spending anomaly or the start of a longer-term improvement. Very little has changed on the economy, with a regular sway of crises followed by fiscal pacifism that seems likely only to prolong the Euro zone problems rather than to solve them. According to the Office for Budget Responsibility OBR), consumer spending levels will increase by only 1.3 per cent in 2013. On the flip side, the Confederation of British Industry (CBI) expects a return to positive real incomes next year (wage growth minus inflation) for the first time in four years.

All of this combines to suggest that the housing market has downside risks but next year there is room for moderate improvement. However, our marginally positive outlook reflects our view that on balance these risks are not expected to fully materialize.


Valoran Real Estate Brokers Issue No. 3 - Mar 2013

Prime Central London Prime Central London (PCL) property has, over the first nine months of 2012, continued to outperform all other sectors of the UK property market. Average prices in PCL have risen by 12 per cent since January according to figures from Land Registry. The average price of a property in PCL is now nearly three times higher than the average price of a property in Greater London, and nearly seven times higher than the UK average. PCL weathered the economic storm of 2007 and returned stronger than before. However, looking forward to 2013 there are a number of factors that could have an impact on prices and performance next year. The recent changes to Stamp Duty Land Tax (SDLT) are having a strong negative impact on PCL property demand and this could continue into 2013, if the Government stays on course with planned changes. Research published by Hamptons International in September showed that transactions on £2 million + properties had fallen by over 40 per cent from April to September 2012, compared to 2011. The uncertainty surrounding the introduction of the Annual Charge and the results of the consultation

regarding the introduction of 15 per cent tax on non-natural persons is only going to perpetuate the reduced transaction levels. Many purchasers are holding off on purchases until there is clarity over Government plans.

Source: Land Registry & Hamptons International Research 1.2M

0%

1M

Pounds Sterling

800K

600K

400K

0%

200K

2% 2%

Janʼ06

Janʼ07

Janʼ08

Janʼ09

Janʼ10

Janʼ11

Prime Greater London

Janʼ12

South East England & Wales

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Valoran Real Estate Brokers Issue No. 3 - Mar 2013

Other factors include: • The Euro zone crisis has buoyed Prime prices over recent years as individuals and investors sought a safe haven for their money. As the crisis rumbles on, continued uncertainty over the future of the Euro will help sustain demand for PCL property well into 2013. • The recent French budget by the new Socialist government introduced tax measures that target High Net worth Individuals (HNWIs) and corporations. These measures may be the catalyst for many of France’s HNWIs to move their money out of the country and seek a less punitive tax regime, such as London.

2013 Forcasts

Prime

• Continued weakness in average bonus payments relative to pre-downturn levels. This will continue to suppress domestic demand for PCL properties. • Limited supply in PCL has always been a factor that supports Prime prices. This is pushing the market into new areas such as South Bank, The City, Fulham and Victoria. The development pipeline for this expanded Prime area is growing, with 683 units expected to come to the market in 2013 followed by 1,048 units in 2014.

Greater London South of England

UK

2013 House Price Forecasts

0%

0%

2%

2%

Rent Forcasts

-1%

2%

2%

0%

2013

2014

2015

2016

2%

2%

2%

4%

UK Mid-Term House Price Forcasts

Source: Hamptons International

UK Transactions Level 150

Pounds Sterling

120 90 60 30 0

Janʼ03

Janʼ04

Janʼ05

Janʼ06

Janʼ07

Janʼ08

Janʼ09

Janʼ10

Janʼ11

Janʼ12

Source: Land Registry

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Valoran Real Estate Brokers Issue No. 3 - Mar 2013

Real Estate Investing: Lesson 2: Common Real Estate Investment Your first property: Your house! During your adult life, you are going to need a roof over your head for many decades to come. And real estate is the only investment that you can live in or rent out to produce an income. Unless you expect to move within the next few years, buying a place probably makes good long-term financial sense. (Even if you need to relocate, you may decide to continue owning the property and use it as a rental property). Owning, usually costs less than renting over the long haul and allows you to build equity (the difference between market value and mortgage loans against the property) in an asset. Turning your current home into a rental property when you move is a simple way to buy and own more properties. This approach is an option if you are already considering investing in real estate (either now or in the future), and you can afford to own two properties. Holding onto your current home when you are buying a new one is more advisable if you are moving within the same area, so that you are close by to manage the property. This approach presents a number of positives: • You save the time and cost of finding a separate

rental property, not to mention the associated transaction costs. • You know the property and have probably taken good care of it and perhaps made some improvements. • You know the target market because the house appealed to you. Turning your home into a short-term rental, however, is usually a bad move because you may not want the responsibilities of being a landlord, yet you force yourself into the landlord business when you convert your home into a rental. How about a vacation house! Many people of means expand their real estate holdings by purchasing a vacation home — a home in an area where they enjoy taking pleasure trips. For most people, buying a vacation home is more of a consumption decision than it is an investment decision. That is not to say that you cannot make a profit from owning a second home. However, potential investment returns should not be the main reason for you to buy a second home. The obvious advantage of having a vacation home is that you no longer have the hassle of securing accommodations when you want to enjoy some downtime. Also, after you arrive at your home away from home, you are, well, home! Things were just as expected. On the other hand, the downsides to

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Valoran Real Estate Brokers Issue No. 3 - Mar 2013

vacation homes are: • Expenses: With a second home, you have the range of nearly all of the costs of a primary home — mortgage interest, insurance, maintenance, utilities, and so on. • Property management: When you are not at your vacation home, things can go wrong. A pipe can burst, for example, and the mess may not be found for days or weeks. Unless the property is close to a kind person willing to keep an eye on it for you, you may incur the additional expense of paying for a property manager to watch the property for you. • Lack of rental income: Most people do not rent out their vacation homes, thus negating the investment property income stream that contributes to the returns real estate investors enjoy. • Obligation to use: Some second homeowners we know complain about feeling forced to use their vacation homes. Often times in marriages, one spouse likes the vacation home much more than the other spouse. Residential Properties! If you have been in the market for a home, you know that in addition to single-family homes, you can choose from numerous types of attached or shared housing that include apartment buildings, condominiums, town homes, and cooperatives. From an investment perspective, our top recommendations are apartment buildings and single-family homes. Unless you can afford a large down payment (25 percent or more), the early years of rental property ownership may financially challenge you. However, with all properties, as time goes on, generating a positive cash flow gets easier because your mortgage expense stays fixed (if you use fixed rate financing) while your rents increase faster than your expenses. Regardless of what you choose to buy, make sure that you run the numbers on your rental income and expenses. 16

Single-family Homes As an investment, single-family detached homes generally perform better in the long run. In a good real estate market, most housing appreciates, but single-family homes tend to outperform other housing types for the following reasons: • Single-family homes tend to attract more potential buyers — most people, when they can afford it, prefer a detached or stand-alone home, especially for the increased privacy. • Attached or shared housing is less expensive and easier to build and to overbuild; because of this surplus potential, such property tends to appreciate more moderately in price. Single-family homes that require just one tenant are simpler to deal with than a multi unit apartment building that requires the management and maintenance of multiple renters and units. The downside, though, is that a vacancy means you have no income coming in. With a single-family home, you are responsible for all maintenance. You can hire someone to do the work, but you still have to find the contractors and coordinate and oversee the work. Making a profit in the early years from the monthly cash flow with a single-family home is generally the hardest stage. The reason being, that such properties usually sell at a premium price relative to the rent that they can command (you pay extra for the land, which you cannot rent). Also


Valoran Real Estate Brokers Issue No. 3 - Mar 2013

remember that with just one tenant, you have no rental income when you have a vacancy. Attached Housing! As the cost of land has climbed over the decades in many areas, packing more housing units that are attached into a given plot of land keeps housing somewhat more affordable. Shared housing makes more sense for investors who do not want to deal with building maintenance and security issues. Condo- Condominiums are typically apartmentstyle units stacked on top of and/or beside one another and sold to individual owners. When you purchase a condominium, you are actually purchasing the interior of a specific unit, as well as a proportionate interest in the common areas — the pool, tennis courts, grounds, hallways, laundry room, and so on. One advantage to a condo, as an investment property, is that of all the attached housing options, condos generally require the lowest-maintenance as most condominium associations deal with issues such as roofing, gardening, and so on for the entire building and receive the benefits of quantity purchasing. Although condos may be somewhat easier to keep up, they tend to appreciate less than single-family homes or apartment buildings, unless the condo is located in a desirable urban area. Town homes Town homes are essentially attached or row homes — a hybrid between a typical airspace only condominium and a single-family house. Like condominiums, town homes are generally attached, typically sharing walls and a continuous roof. But town homes are often two-story buildings that come with a small yard and offer more privacy than a condominium because you do not have someone living on top of your unit. Co-operatives Co-operatives are a type of shared housing, which have elements in common with apartments and condos. When you buy a cooperative, you own a stock certificate that represents your share of the

entire building, including usage rights to a specific living space per a separate written occupancy agreement. Unlike a condo, you generally need to get approval from the co-operative association if you want to remodel or rent your unit to a tenant. In some co-ops, you must even gain approval from the association for the sale of your unit to a proposed buyer. Apartments Not only do apartment buildings generally enjoy healthy long-term appreciation potential, but they also often produce positive cash flow (rental income – expenses) in the early years of ownership. Apartment buildings, particularly those with more units, generally produce a small positive cash flow, even in the early years of rental ownership.

Commercial Real Estate Commercial real estate is a generic term that includes properties used for office, retail, and industrial purposes. You can also include selfstorage and hospitality (hotels and motels) properties in this category. If you are a knowledgeable real estate investor and you like a challenge, you need to know two good reasons to invest in commercial real estate: • You can use some of the space if you own your own small business. Just as it is generally more cost-effective to own your home rather than rent over the years, so it is with commercial real estate if — and this is a big if — you buy at a reasonably good time and hold the property www.valoran.ae


Valoran Real Estate Brokers Issue No. 3 - Mar 2013

for many years. • Your analysis of your local market suggests that it is a good time to buy. We want to be clear, though, that commercial real estate is not our first recommendation, especially for inexperienced investors. Residential real estate is generally far easier to understand and most likely carries a lower investment and tenant risks. You must check out, over a number of years, the supply and demand statistics. How much total space (and new space) is available for rent, and how has that changed in recent years? What is the vacancy rate, and how has that changed over time? Also, examine the rental rates, usually quoted as a price per square foot.

investors who believe that the property will appreciate like any other investment. The other group is people who use the condo hotel or timeshare for personal use and offset some of their costs. From an investment standpoint, the fundamental problem with timeshares is that they are overpriced, and like a condominium, you own no land (which is what generally appreciates well over time). For example, suppose that a particular unit would cost $150,000 to buy. When this unit is carved up into weekly ownership units, the total cost of all those units can easily approach four to five times that amount! To add insult to injury, investors find that another problem with timeshares is the high maintenance or annual service fees.

A potential risk to be incurred while purchasing a commercial property in an area, which is likely to produce a disappointing investment return, is a market where the supply of available space has increased faster than the demand, leading to higher vacancies and falling rental rates. A slowing local economy and a higher unemployment rate also spell trouble for commercial real estate prices. Condo Hotels & Timeshares Timeshares, a concept created in the 1960s, are a form of ownership or right to use a property. A more recent trend in real estate investing is condo hotels, which in many ways are simply a new angle on the old concept of timeshares. A condo hotel looks and operates just like any other firstclass hotel, with the difference that each room is separately owned. The guests have no idea who owns their room. Both timeshares and condo hotels typically involve luxury resort locations with amenities such as golf courses and/or spas. The difference between the traditional timeshare and condo hotel is the interval that the unit is available — condo hotels are operated on a day-to-day availability, while timeshares are typically rented in fixed intervals such as weeks. Two types of individuals are attracted to investing in condo hotels and timeshares. One group is 18

Many owners of timeshares find that they want to vacation at a different location or time of year than what they originally purchased. To meet this need, several companies offer to broker or sell timeshare slots. However, timeshare availability and desirability have so many variables — including location, time of year, and quality of the particular resort — that it has been difficult to fairly value and trade timeshares. The developers and operators of condo hotels love the concept because one of the most consistently successful principles of real estate is increasing value by fractionalizing interests in real estate. As with timeshares, the developers are able to sell each individual hotel room for much more than they could get for the entire project. Condo hotel operators are able to generate additional revenue from service and maintenance fees to cover their costs of operations. Often, the owners’ use of their own rooms does not negatively


Valoran Real Estate Brokers Issue No. 3 - Mar 2013

impact the overall revenues of the property because the rooms would have sometimes been vacant anyway. Condo hotels allow their owners to stay in their units but often impose limits on the amount of personal usage. The purchaser of the condo hotel unit sees this type of investment as an option to direct ownership of a second home and likes the ability to generate income. The professional management is another one of the attractions to investors. The owners do not pay a management fee to the hotel operator unless their room is rented, and then the collected revenue is split.

However, timeshares may make sense for you if you like to vacation at the same resort around the same time every year and if the annual service or maintenance fees compare favorably to the cost of simply staying in a comparable resort. Remember, though, that if the deal seems too good to be true, it is too good to be true. As with timeshares, the only folks who generally make money with condo hotels are the developers, not the folks who buy specific days of ownership.

Many investors’ first experiences with timeshares are tempting offers of a free meal, a great discount offer to a theme park, or even a free one or two night stay at the resort, with the catch that they have to spend some time listening to an informational presentation. These offers usually come from individuals contacting you in known tourist locations or when you check into a hotel that just happens to offer condos as well.

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Valoran Real Estate Brokers Issue No. 3 - Mar 2013

Property of the month: About Culture Village (Al Jaddaf): Culture Village by Dubai Properties Group, is intended to be a world-class destination that mixes old-world pleasures and entertainment with a modern, sophisticated ambiance.

Eastern history with the heritage of ancient Dubai. Throughout the Dubai Culture development, the unique architecture offers a unique mixture of ancient Arabic traditions with Dubai design. This blend, the finest of old and new, has resulted in Dubai Culture Village becoming one of the most desirable residential locations in modern day Dubai. Divided into the residential, retail and commercial zones, Dubai Culture Village encapsulates the true spirit of ancient Arabic architecture with its wind towers, stone walkways and traditional souks. Throughout the Dubai Culture Village, luxury hotels and designer boutiques sit comfortably next to galleries, rare book shops and performing arts centers.

Located along the shoreline of the Dubai Creek, the Dubai Culture Village is a rich blend of Middle

We are offering you the opportunity to purchase exclusive units with us, located on different floors, which include: • • •

20

Studios - 586 & 715 sq.ft 1 B/Rs - 951, 970, 1120 & 1140 sq.ft 2 B/Rs - 1360 & 1482 sq.ft

The commercial district will house cultural institutions, schools, academies for art, music, dance, pottery and other crafts. World-class infrastructure and facilities will be available for each organization. The retail district will feature luxury hotels, designer boutique-style restaurants and coffee shops, as well as rare book shops and art and craft galleries. A rustic traditional souk, offering Arabian crafts, antiques, and spices and herbs, will be the focal point of the retail district.

Price: Starting from AED 799 per sq.ft

(LESS THAN THE ORIGINAL PRICE)


Valoran Real Estate Brokers Issue No. 3 - Mar 2013

When it was initially launched, Dubai Culture Village was planned as the most exclusive address in Dubai, designed to appeal to both local and international investors alike. Exclusive developments including the Palazzo Versace, the Iris Asmar and the D1 Tower seem set to ensure that the property in Dubai Culture Village is considered to be the most desirable, and without doubt unique, residential location in modern day Dubai. With numerous high quality luxury developments locating themselves in such close proximity in Dubai Culture Village, it seems likely that the years to come will see Culture Village achieve its objective of becoming Dubai’s most desirable and sought after residential address.

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Valoran Real Estate Brokers Issue No. 3 - Mar 2013

References http://www.timesofoman.com/News/Article-8882.aspx http://www.thefirstgroup.com http://www.arabianbusiness.com/in-debt-nakheel-tenders-for-new-palm-projects-490428. html?tab=Article http://en-maktoob.news.yahoo.com/stocks-news-mideast-real-estate-stocks-dubai-lift-074445376-sector.html http://www.reidin.com/news/showNews/ae_asteco-aeasteco-20130204-2/dubai-report---h2-2012.html http://gulfbusiness.com/2013/01/dubais-residential-rents-rise-16-in-2012/ http://m.arabianbusiness.com/dubai-residential-rents-up-17-in-2012-cbre-486591.html http://www.bhomes.com/pdf/oh-19thmay12.pdf http://www.mydestination.com/dubai/regionalinfo/6182368/emirates-living http://ventureh.com/media/xmlfeeds/propertyfinder_ventureh.xml http://www.propertyfinder.ae/en/buy/villa-for-sale-dubai-the-springs-790211.html http://www.mydestination.com/dubai/regionalinfo/6182368/emirates-living http://www.rockyrealestate.com/propertydetails/residential/sales/VIL-S01120.aspx http://www.halconrealestate.com/dubai-real-estate-projects/the-springs/index.xhtml http://www.bayut.com/output-483030-villas.pdf http://www.propertyportal.ae/content/ http://www.propertyfinder.ae/en/rent/villa-for-rent-dubai-meadows-871861.html http://www.hamptons.co.uk/media/74912/2013forecast.pdf http://am.jpmorgan.co.uk/institutional/.../researchandreports/realestate.aspx http://www.guardian.co.uk/business/housingmarket http://www.joneslanglasalle.co.uk

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Valoran Real Estate Brokers Issue No. 3 - Mar 2013

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March 2013 - eZine  

VALORAN REAL ESTATE BROKERS - Monthly Real Estate Magazine published and distributed directly to property owners and investors.

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