Dubai or not Dubai?

Friday, April 29, 2011

Dubai or not Dubai?

Thousands of investors took a hit when Dubai's property market crumbled and the off-plan frenzy came to an end. No longer attractive to short-term investors, we wondered why anyone would buy there now. So, for an update on this unique destination, we spoke to Jonathan Fothergill, director of UAE Valuations at Cluttons UAE.

Given new stock is still coming to market in Dubai (Jones Lang LaSalle recently forecast another 25,000 units in 2011 alone, be they for the large part on projects started previously), is now a good time to buy there. Is it worth waiting for prices to come down?
My own view is that in the more sought after, established locations and for some of the better properties, particularly in established lifestyle projects, such as the Old Town and Burj Khalifa district, as well as the better properties in the Marina and Palm, the major falls in prices have already taken place and values are now generally levelling out.

In some of the less established, less desirable areas there is probably some significant way to go with price falls.

Will property in Dubai ever attract the kind of short-term investors, those who perfected the art of flipping, as it did before the crash in 2008?
Definitely not in my opinion but I think the market will always be interesting for more patient, long-term speculators.

Which type of investors does Dubai hope to attract going forward? Does the market there need to reinvent itself, given the off-plan market is for all intents and purposes dead?
The market is certainly moving towards catering for the long-term end user/occupier rather than the short-term flipper. I don't think the market necessarily needs to reinvent itself because the attractiveness of Dubai is assured in the long term and people will always want to come and live here and will have a fundamental need for a property here.

Clearly many investors have had their fingers burnt and have lost a lot of money in the recent downturn and there is certainly a need to improve the regulatory system locally and to demonstrate to overseas investors that it is safe and easy to purchase property locally. Off-plan is certainly dead and is unlikely to ever return in my opinion, but I think the existing built market provides many different attractive options to different types of buyer.

How much have rental values been affected by the saturated market? If you're thinking of moving to Dubai and intend to rent a home, can you get a good deal on the rent you pay?
Rents of course have dropped significantly since 2008, when they were unrealistically high, and now is certainly a tenants' market, but relative to many other global locations rents can still seem high. What is good is that you now have so many options in the rental market and you can spend as much or as little as you want on rent.

For example you can rent a one-bedroom apartment in a less attractive location, such as Silicon Oasis, for as little as AED40,000-AED50,000 (£6,670-£8,338) p.a. and at the other extreme, for one of the better buildings in the Marina or on the Palm you can pay circa AED120,000-AED130,000 (£20,000-£21,700) p.a. for a one-bedroom apartment. In the more sought after locations, such as the Palm, Marina and Jumeirah, rents are unlikely to fall much further.

According to rentals website HomeAway.co.uk, enquiries for rentals in Dubai in Q4 2010 rose 26 per cent year-on-year. Does this surprise you - are there signs that Dubai's appeal as a tourism destination is bouncing back?
It is clear that the tourists are now back in Dubai in a big way and that the emirate is now better value and more attractive than ever. Hotel occupancy levels are doing excellently, excellent infrastructure is now in place for the tourists, such as the metro and the new Terminal 3, and Dubai still has all of the appealing factors for tourists that it has always had and now more, for example the attraction of the Burj Khalifa (the tallest building in the world), the Atlantis, sporting events and the Dubai Mall.

In which areas would you recommend buying a lettable key-ready holiday apartment in a completed development? What are typical price points there?
I would recommend shoreline apartments in developments such as Tiara Residence and Oceana apartments, on Palm Jumeirah, as being good options as holiday apartment lets. Prices start at around AED1.3-1.5million (£217K-£250K) for one-bedroom apartments.

For sale in Dubai


Arabian Ranches property - Dubai


Where: Arabian Ranches Price: AED4.1million (£686K)
Four-bedroom villa set in a landscaped garden with a veranda, jacuzzi and pool. Golf, polo and community Contact: Cluttons: 00 971 4 334 8585; www.cluttons.com.


Park island Dubai Marina property




Where: Park Island, Dubai Marina Price: AED4.2million (£703K)
Three-bedroom apartment with roof terrace and marina views. Infinity pools, gym, squash court and theatre. Contact: Cluttons: 00 971 4 334 8585; www.cluttons.com.

ESSENTIALS - BUYING ADVICE Claire McCarthy, a solicitor at Dubai law firm James Berry & Associates, outlines the key things to be aware of when buying a completed property in Dubai.

Title - Request evidence that your seller actually owns the property, by asking to see the title deed.

Fees - Aside from the purchase price, the two main fees payable will be the Land Department's transfer fee and the broker's fees. The Land Department's transfer fee is two per cent of the purchase price. Sellers would prefer that the buyer pays the full two per cent but there is no reason why that should be the case. A fair compromise would be that it is shared 50/50. Likewise in relation to the broker's fee. If there is a real dearth of buyers and the broker is keen for the sale to go through, he may even be prepared to negotiate on his fee.

Tenants - If the property is let, ensure that the tenant will actually vacate the property if you want vacant possession on completion. Tenants have extensive rights pursuant to Dubai law. Even if the landlord wants to sell the property, then in the absence of any default on the part of the tenant, the landlord would need to give the tenant at least 12 months notice prior to the determined date of eviction.

Service charge - Request detailed information on the current service charge budget, and in particular the amount payable to the owner of the common parts of the building and also to the master developer in connection with the master community.

Inheritance - In order to minimise legal hassles on death, it is important to ensure that a valid will is put in place, which covers your property in Dubai. In the UAE, succession of real estate is a grey area and the court with jurisdiction to deal with inheritance issues is the Sharia Court. Matters are dealt with case by case. This wide discretion, coupled with uncertainty of the law itself, can leave expatriates with an unfavourable succession solution if no advice is obtained.

Visas - You can apply for a visit visa by virtue of your ownership of a property in Dubai, subject to certain conditions being met, including the property being worth at least AED1million, and the owner proving a personal income of at least AED10,000 per month. If your application is successful, you would be granted a six-month multiple entry visit visa. Alternatively, if you are employed in the UAE or have invested in a business here, you can explore the option of being sponsored by your employer or having an investor visa.

claire.mccarthy@jamesberrylaw.ae

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A Place In The Sun