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Yes, but! Questions & Doubt About UAE Real Estate
Posted on 01/01/09
As with all markets, the UAE real estate market has its obstacles. Today's blog will tackle these questions in an attempt to address some common doubts about UAE real estate. Some important questions have arisen regarding the UAE property market, some of which are listed below:
1) Is the commute from Ajman to Dubai worth the lower cost of living?
2) Is the recent decline in Dubai real estate values the beginning of a long-term trend?
3) Can the electrical and utility infrastructure in the UAE support new developments?
4) What methods of legal recourse exist if a property developer reneges on a contract?
5) Do UAE real estate investments have a good return on investment (ROI) potential?
Sufficient answers to these questions are necessary to instill confidence in savvy property investors within the UAE in addition to those persons interested in understanding the more complex intricacies of real estate developments. Thus, I will attempt to answer these questions in sequential order.
ANSWERS:
1) Ajman is located two emirates north of Dubai and is between 20-35 kilometers from Dubai depending on starting and ending points. Depending on traffic conditions, a commute from Ajman could vary in time. Currently, two major roads including Emirates road and Alarouba road provide logistical support for commuters and transport vehicles between the two emirates. With no traffic, the commute should not take longer than half an hour and with traffic the commute could last upwards of an hour.
2) Many Dubai real estate developments have appreciated in value more than they have depreciated in recent fiscal quarters. For long term holders, Dubai property has been a good investment. Provided the UAE economy continues to grow with tourism, commercial development and service industry expansion, Dubai real estate could stabilize at values per square foot above initial market and pre-market prices and appreciate thereafter. The length of time for stabilization may be partially dependent on developments in the global economy.
3) Mainstream property developments within the UAE are supported by the government, some of which have completion guarantees that include all aspects of completion i.e. electricity and utilities. Investigating the government sponsorship criteria can assist in determining the access to these vital aspects of infrastructure.
4) Dubai property developers are subject to 10% escrow down-payments on developments in addition to government sponsorship. Also, depending on the marketing firm involved, developers are pre-screened for solvency and reliability prior to sales sub-contracting. In general, UAE development standards are higher than in other parts of the World.
5) If an investor includes property appreciation and rental income in ROI calculations, investment in certain parts of the UAE real estate market still provide attractive opportunities for investment return. By purchasing at pre-market prices and studying development and micro-economic trends within the emirates, a positive ROI can be a realistic forecast and portfolio diversification opportunity.
Posted by A.W.Berry
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About me: I am an American with a diverse heritage and have lived in several countries. My work experience and background centers around corporate, marketing and financial areas and my educational background includes a M.B.A. in Finance and Marketing in addition to a M.A. in Philosophy.
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