Time for Dubai realty investors to get back into luxury

Published : 10 Feb 2018 ,      Source : Gulf News

With less high-end stock coming through, the returns and yields could trend higher

Despite the popular global assumption that the majority of Dubai’s real estate stock and transaction volumes are concentrated in the prime/luxury end of the market, this sector represents just a small portion of the residential market. In fact, only 3 per cent of all residential transactions in 2017 were concluded within this segment.

This may come as a surprise given Dubai’s image as an expensive metropolis with a robust luxury property market. But it is less paradoxical when one considers the large amount of stock that has transacted in the mid- and affordable segments over the past 12 months, overshadowing the prime market that just a few years ago was firmly in the limelight.

In any anomaly one may find opportunity. however, as the market continues to be flooded with new stock in the lower end, the prime/ultra-prime segment may provide better prospects for investors in the coming few years.

Prime and ultra-prime property prices in Dubai are now among the lowest of any comparable global hub. This stance is further intensified by the varied level of price softening witnessed over the last three years across all segments of the market. Prime properties in Dubai are approximately 40 per cent less expensive than Singapore and 50 per cent less than Moscow and Paris.

Dubai’s ultra-prime market is also relatively inexpensive compared to the likes of Shanghai and Tokyo, with average prices almost 60-70 per cent lower, and presents excellent value against prices per square metre in London and New York.

The long-term investment potential in Dubai’s prime segment is reinforced by a nominal tax regime and notably low real estate investment costs. These costs — associated with buying, holding and selling property — can detract significantly from an investment and essentially erode the attractiveness of an asset.

Cities such as Hong Kong carry investment costs of approximately 32 per cent, while costs in Singapore and Tokyo are nearly 20 per cent, representing an additional charge equivalent to almost a quarter of the value just to buy, sell or hold property. With notably low buying and selling fees, and almost no holding charges, investment costs in Dubai amount to just 8 per cent — comparable to Shanghai and Mumbai.

Although these costs are often overlooked by investors, they have a significant impact on any comparison of prospective investment yields in different cities across the world.

The trickle-down effects of continued low oil prices, a strong US dollar and continued geopolitical turbulence have collectively cast a significant dent in the absorption levels in prime stock. However, the upcoming supply pipeline is modest in this sector, with most new stock concentrated in the low-to-mid market segment — an upsurge created on the back of projected demand from Expo 2020.

Given Dubai’s position as a global tourist destination and regional economic hub within five hours flying time of around one third of the world’s population, strong underlying demand for prime and ultra-prime properties is expected to be sustained in the long run.

As the market expands and continues to mature, gaining depth and liquidity in line with population growth, it is likely that demographic pressures will continue to mould the cityscape in a way that accentuates the pull of core areas. These “city centres”, shaped by demographics just as much as by master planning, will also see natural price appreciation driven both by desirability and spatial limitations.

Prime and ultra-prime segments will be the direct beneficiaries of this in terms of price appreciation and stability, although it will also likely trigger further yield compression, positioning Dubai on a par with other global hubs.

At the other end of the spectrum, in most outer areas that are being flooded by lower-priced projects and are free of land constraints, even optimistic demographic growth will be insufficient to drive notable midterm price appreciation, creating a widening gap with prime and ultra-prime prices in central areas.

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Related News

Off-plan sales dominate Abu Dhabi housing market

Off-plan sales are driving the Abu Dhabi housing market as the emirate continues to feel the effects of diminished government spending and sluggish economic growth, according to a new report from international property company Chestertons MENA.

According to the report, off-plan sales activity remained high in Q4, with developers rolling out a number of incentives to attract buyers. The secondary housing market, however, saw a 2 percent decline in apartment sales prices and a 1 percent decline in villa prices, with GCC and Arab nationals dominating both markets.

“Throughout 2017, we saw the effects of a number of economic factors, including low oil prices, reduced government spending, increased stock in the secondary market, a rising cost-of-living and redundancies,” said Ivana Gazivoda Vucinic, head of consulting and research at Chesterstons MENA.

On average, apartment sale prices fell by 2 percent during Q4, with certain areas experiencing a more pronounced decline, such as Reem Island (5 percent), which Chestertons said is a reflection of waning demand.

Saadiyat Island, on the other hand, registered the steepest increase – 5 percent – in apartment sales prices for a second consecutive quarter, partly fuelled by the inauguration of the Louvre Abu Dhabi. On average, prices increased rom AED 1,362 per square-foot to AED 1,430 per square foot on the island, while Reem Island prices fell from AED 1,362 per square foot to AED 1,242 per square foot.

Additionally, average villa sales prices fell by 1 percent in Q4, with the Al Raha Beach Area falling more than 4 percent from AED 1,348 per square foot to AED 1,282 per square foot.

Abu Dhabi’s rental market demonstrated similar trends, with an overall decline in rental prices of 2 percent and 1 percent for apartments and villas, respectively, echoing results from the previous quarter.

“Shrinking company housing allowances and excess rental supply exerted downward pressure on rental prices in the emirate,” Vucinic added. “Vacancies in some locations, such as Al Raha Beach, surged over the quarter as residents downsized their accommodation or moved to more affordable communities.”

Downsizing, however, was positive news for investors, with rents for one-bedroom apartments in Al Khalidiya rising by 7 percent.

In the villa market, Al Reef and Reem Island emerged as preferred locations. In Al Reef, for example, a typical three-bedroom villa could be rented for AED 120,000 a year, with preferential leasing terms for some residents.

In overall terms, the mix of high-performing areas changed in Q4, with Saadiyat Island being the best performing area in the apartment segment and Khalifa City showing positive trends in the villa segment. Mohammed bin Zayed City registered the highest increase in villa rents at almost 2 percent, bucking the wider market trend.

“There is a likelihood of positive economic sentiment emerging from ADNOC’s recent announcement to invest $109 billion in growth strategies,” Vucinic noted. “This plan could be the turning point for Abu Dhabi’s real estate sector as it could generate new jobs and therefore renewed demand for residential property.”

8 Feb 2018

Middle East real estate tycoon warns of a rocky 2019 — but says region is ripe for investment

  • A mogul of Middle East real estate development, Emaar Properties Chairman Mohamed Alabbar, said that the region has plenty of development opportunities despite geopolitical tensions.
  • “If I was to look at the region as a whole I’m still positive,” he told CNBC at the Milken Institute MENA Summit in Abu Dhabi on Wednesday.
  • However, he cautioned investors to remain prudent in the longer term.

A mogul of Middle East real estate development, Emaar Properties Chairman Mohamed Alabbar, said that the region has plenty of development opportunities despite geopolitical tensions and difficulties doing business.

“If I was to look at the region as a whole I’m still positive,” he told CNBC at the Milken Institute MENA Summit in Abu Dhabi on Wednesday. However, he cautioned investors to remain prudent in the longer term.

“I’m just careful about what is 2019. I’m just worried that we’ve been having a good time for too long. So I just hope that 2019 goes well … So make sure your balance sheet and debt level is at reasonable levels, so if there’s a shake-up you can handle it,” he said.

Emaar Properties is a real estate development company based in the United Arab Emirates (UAE) which is responsible for developments throughout the country and the wider Middle East, and beyond.

Founded in 1997, Emaar Properties has been responsible for much of the development of Dubai, including the iconic Burj Khalifa, the world’s tallest building. It has also developed shopping malls and residential property, hotels and entertainment venues.

The real estate firm also has developments further afield such as in India and Pakistan.

Speaking to CNBC, Alabbar summarized the outlook for the company.

“My view is that Morocco is doing well for us, I would say Egypt is doing extremely well; Saudi Arabia with all the restructuring going on, it’s going to be a fabulous opportunity. In the UAE, we still expect to grow 20 percent on an annual basis,” he said, noting that the company’s growth in India was recovering and Pakistan was doing “reasonably well” for the firm.

Alabbar said the company had achieved around $5 billion of sales in 2017 and close to $1.8 billion of net profit before depreciation, with the company growing around 20 to 25 percent on an annual basis.

“Trust me, the margins, the opportunities and the growth I’ve been having in the Middle East over the last 20 years — even if you make a mistake, it’s so worth it,” he said, although he noted doing business in the wider Middle East had its challenges.

“Of course if I’m doing business in the UAE, it’s comfortable, it’s safe. But if I have to go to Cairo (in Egypt) I have to know the government, I have to know the mayor of Cairo, the mayor of Alexandria. But that’s what we do, that’s what we’re paid for, that’s what we have to do to grow our business,” he said.

The Middle East is certainly not a region for the faint-hearted. There is ongoing geopolitical turbulence caused by the continuing conflict in Yemen, uncertainty in Syria and Iraq about the possible resurgence of terrorist group Islamic State and internal disputes within the Gulf Cooperation Council (with Qatar being sidelined by Saudi Arabia, Bahrain, the UAE and Egypt), not to mention perceived proxy wars between Saudi Arabia and Iran.

Couple these issues with economic instability, prompted by the lower oil price, and there’s a combustive mix for most businesses. Alabbar said it was nothing new, however, and that the region was ripe for real estate development and infrastructure investment.

“I think that what the Middle East is going through is, unfortunately, not new … But the truth is that the opportunities exist — there are millions of people who have to go to school, they have to shop, they have to find jobs and open new factories, there’s tourism, so therefore that will contribute to economic growth in the whole region.”

Asked about Emaar Properties’ balance sheet, Alabbar said there had been difficult times.

“2007, 2008 and 2009 was very painful and I try not to forget the lesson. And I deal with bankers with a lot of respect but when they come and tell me ‘your balance sheet is not very efficient’ I know that I’m doing a good job. So I like to keep my debt at a very reasonable level. Then again, we have to do business, we have to be aggressive but at the same time we have to keep our eye on the cycle.”

8 Feb 2018

World’s next tallest hotel set to open in Dubai

Dubai: Shaikh Zayed Road will continue to host the “world’s tallest hotel”, with the opening this week of the Gevora built by the Al Attar Group.
The 75-floor structure stands at a height of 356 metres (1,167.98 feet) and has 528 rooms. It is located right near the DIFC cluster and with the Emirates Towers as neighbours.

Gevora and the Al Attar Group hope to take over the world’s tallest hotel mantle from the JW Marriott Marquis Hotel just down Shaikh Zayed Road, which soars to 1,165 feet. The property opened in 2012 and has 1,608 rooms.

Dubai has two other entrants in the tallest hotel stakes, in Rose Rayhann, which stands tall at 1,093 feetk and the Burj Al Arab, at 1,053 feet.
The Al Attar Group has multiple high-rise interests along Shaikh Zayed Road.

Most of the other hotels in the tall rankings are dominated by Chinese developers and their flagship hotel projects.

Gevora’s opening on February 12 will allow for a better balance to be struck between Dubai and China in hosting these eye-catching landmarks.
The Al Attar Group has multiple high-rise interests along Shaikh Zayed Road; in fact it was among the handful of developers who moved in with projects just as the location on either side was coming into prominence in the early 2000’s.

Shaikh Zayed Road shot into prime time prominence with the Emirates Towers, which opened in April of 2000. Prior to that there were just the towers on the opposite side of the Road and near the Crowne Plaza.

Then the freehold boom started in Dubai in earnest and the Burj Khalifa and the many signature towers within the DIFC cluster came into being. And later on there was Business Bay and its line-up of Executive Towers.

Now that the Gevora is all set to open its doors, what next for Dubai’s Shaikh Zayed Road? Is there space left for new builds on what is already an area with the highest concentration of high-rises?

There could well be new possibilities taking shape, with the Dh5 billion Emirates Towers Business Park as a possible destination. And further down the Road, there will be two “super-tall” structures forming part of “Uptown Dubai”, which will be built by the Jumeirah Lake Towers developer DMCC.

10 Feb 2018

Time for Dubai realty investors to get back into luxury

Despite the popular global assumption that the majority of Dubai’s real estate stock and transaction volumes are concentrated in the prime/luxury end of the market, this sector represents just a small portion of the residential market. In fact, only 3 per cent of all residential transactions in 2017 were concluded within this segment.

This may come as a surprise given Dubai’s image as an expensive metropolis with a robust luxury property market. But it is less paradoxical when one considers the large amount of stock that has transacted in the mid- and affordable segments over the past 12 months, overshadowing the prime market that just a few years ago was firmly in the limelight.

In any anomaly one may find opportunity. however, as the market continues to be flooded with new stock in the lower end, the prime/ultra-prime segment may provide better prospects for investors in the coming few years.

Prime and ultra-prime property prices in Dubai are now among the lowest of any comparable global hub. This stance is further intensified by the varied level of price softening witnessed over the last three years across all segments of the market. Prime properties in Dubai are approximately 40 per cent less expensive than Singapore and 50 per cent less than Moscow and Paris.

Dubai’s ultra-prime market is also relatively inexpensive compared to the likes of Shanghai and Tokyo, with average prices almost 60-70 per cent lower, and presents excellent value against prices per square metre in London and New York.

The long-term investment potential in Dubai’s prime segment is reinforced by a nominal tax regime and notably low real estate investment costs. These costs — associated with buying, holding and selling property — can detract significantly from an investment and essentially erode the attractiveness of an asset.

Cities such as Hong Kong carry investment costs of approximately 32 per cent, while costs in Singapore and Tokyo are nearly 20 per cent, representing an additional charge equivalent to almost a quarter of the value just to buy, sell or hold property. With notably low buying and selling fees, and almost no holding charges, investment costs in Dubai amount to just 8 per cent — comparable to Shanghai and Mumbai.

Although these costs are often overlooked by investors, they have a significant impact on any comparison of prospective investment yields in different cities across the world.

The trickle-down effects of continued low oil prices, a strong US dollar and continued geopolitical turbulence have collectively cast a significant dent in the absorption levels in prime stock. However, the upcoming supply pipeline is modest in this sector, with most new stock concentrated in the low-to-mid market segment — an upsurge created on the back of projected demand from Expo 2020.

Given Dubai’s position as a global tourist destination and regional economic hub within five hours flying time of around one third of the world’s population, strong underlying demand for prime and ultra-prime properties is expected to be sustained in the long run.

As the market expands and continues to mature, gaining depth and liquidity in line with population growth, it is likely that demographic pressures will continue to mould the cityscape in a way that accentuates the pull of core areas. These “city centres”, shaped by demographics just as much as by master planning, will also see natural price appreciation driven both by desirability and spatial limitations.

Prime and ultra-prime segments will be the direct beneficiaries of this in terms of price appreciation and stability, although it will also likely trigger further yield compression, positioning Dubai on a par with other global hubs.

At the other end of the spectrum, in most outer areas that are being flooded by lower-priced projects and are free of land constraints, even optimistic demographic growth will be insufficient to drive notable midterm price appreciation, creating a widening gap with prime and ultra-prime prices in central areas.

10 Feb 2018

Dubai residential property prices ‘under pressure’

Dubai’s residential property market shows few signs of bouncing back quickly from a now three-year downturn. Having stabilized in 2016, prices saw renewed declines last year as housing supply far outpaced demand, said a leading property firm Asteco.

The prices of apartments and villas fell by 7.8 per cent y/y and 5.6 per cent y/y respectively in the fourth quarter of 2017, the fastest drop for several quarters. Prices are down 16-19 per cent from their peaks of over three years ago, stated Asteco in its report.

These trends are confirmed by other data sources. Reidin, another real estate property tracker, shows villa and apartment prices down 1.9 per cent y/y and 3.5 y/y respectively in Q4.

Latest data on Phidar Advisory’s Dubai 9/5 House price Index also points to softness in Dubai’s residential real estate market.

Alongside lower prices, rents have also been falling. According to Asteco, rents were down 11.1 per cent y/y for apartments and 9.6 per cent y/y for villas in Q4, with accelerated declines from earlier in the year.

Similar to sales prices, rents are down 19-20 per cent from their previous peaks. This may even understate market pressures, with some of the adjustment coming from non-price factors such as better payment terms or rent-free periods. With rents falling faster than sales prices, yields on property investment have become more compressed.

Dubai’s property market has been on a rollercoaster ride for more than a decade. Residential prices fell by around half in the years following the 2008-09 financial crisis, but rebounded from 2013, helped by the return of confidence linked to the swift rise in oil prices back above $100 per barrel.

Indeed, the market was likely driven by speculative buyers hoping to cash in on Dubai’s economic recovery. The emirate’s award as host of the Expo 2020 event in 4Q13 also saw a spike in the number of buyers entering the real estate market. This pushed apartment prices up by a staggering 60 per cent y/y that quarter, with villa prices up 35 per cent y/y.

To prevent a repeat of the boom-bust cycle in property prices that had plagued Dubai’s economy before, the authorities tightened regulations.

They doubled the land registration fee to 4 per cent and introduced tighter loan-to-value ratios to help mitigate risks to banks’ balance sheets, rein in speculative activity and gear the market more towards end-buyers. This had an almost immediate impact, said the report.

Growth in apartment prices slowed from 41 per cent y/y in 1H14 to 19 per cent y/y in 2H14, while villa prices slowed from 20 per cent y/y to 8 per cent y/y during the same period, it stated.

Growth in supply has been a key factor in recent price weakness – and a legacy of the long lead times in bringing large real estate projects to market.

According to Jones Lang LaSalle (JLL), a property consultant, growth in housing supply slowed slightly from 3.9 per cent y/y in 2016 to 2.9 per cent y/y in 2017. With population growth possibly in the range of 1-2 per cent y/y, occupancy rates continued to remain low, adding further downward pressure on prices.

Meanwhile, demand remained lackluster as the impact of more stringent loan-to-value rules was compounded by the effects of higher interest rates, higher fuel costs, and modest wage and job growth, all of which reduced consumer purchasing power.

Transaction levels in 2017 were low compared to earlier years, averaging Dh3.5 billion per month, down 6.5 per cent from 2016. But they were helped by a shift towards the more affordable housing segment, mainly as a result of a rise in the incidence of cash-strapped and risk averse buyers.

JLL pointed out that the property market downturn has not been exclusive to Dubai, or to the residential sector.

Prices of apartments and villas in Abu Dhabi fell by a steeper 8 per cent y/y and 7.9 per cent y/y respectively, on average, in the fourth quarter of 2017 with the market appearing to suffer from the same issue of oversupply.

Prices and rents in the commercial property sector are also falling. Meanwhile, other GCC countries are witnessing their own property market corrections.

One key factor in recent market weakness – rising supply – is expected to grow over coming quarters: JLL expect supply growth to pick up to 9 per cent this year.

The near completion of a number of residential developments, including New Dubai Gate in the Jumeirah Lake Towers district, The Pad in Business Bay, Eagle Heights in Sports City and Serenia Residences on Palm Jumeirah, will likely add 17,000 new apartments to the market in early 2018, stated the report.

Although project launches are expected to ease off in the 2H18, the projected supply increase in 2019, at 8 per cent, is nearly as large, it added.

10 Feb 2018

Dubai Land Department and Aqari Global to promote real estate in US

The Dubai Land Department (DLD), the emirate’s property legislator, entered into a strategic cooperation and partnership agreement with Aqari Global Ltd ‘Century 21 United Arab Emirates to promote Dubai real estate in the United States.

“We pay close attention to the US market, especially as US investors are among the top foreign nationalities to invest in Dubai’s real estate market each year,” said Sultan Butti bin Mejren, director general of the DLD. “The US is full of investors looking for exceptional investment destinations around the world, and Dubai is certainly capable of answering this demand with the city’s diverse investment opportunities.”

The agreement will help promote Dubai real estate, provide specialized services to help attract investment and support the DLD by participating in exhibitions and overseas real estate promotion workshops in the US.

US investors have made 2,298 investment transactions valued at over Dh4 billion in the past three years, according to Majida Ali Rashid, assistant director general of DLD and head of the Real Estate Investment and promotion Center, the investment arm of the DLD.

“This agreement is aligned with our strategy of strengthening cooperation between a select group of real estate promotion trustees in different countries to attract new investors from around the world to Dubai. We are confident that our agreement with Aqari Global Ltd ‘Century 21’ will help us achieve that goal,” she said.

Aqari Global Ltd ‘Century 21’ is a real estate agency with more than 7,500 offices in 80 countries.

10 Feb 2018

Dubai’s new-generation residences: live, work and play spaces

Live, work and play spaces designed to appeal to millennials are changing the way homeowners in Dubai look at property. Developers are delivering a lifestyle with retail, club areas and recreation built in, and house-hunters are more likely to consider the whole package than the individual house.
Having the lifestyle you desire right on your doorstep is crucial to this segment. David Godchaux, CEO of Core-Savills, tells PW, “The growing interest for bona fide mixed-use developments and adoption of the live-work-play philosophy by millennials, is leading communities to blur the edges between these spaces.

“Jumeirah Lakes Towers [JLT] and Dubai Marina, with Dubai Internet City and Dubai Media City, can be very good examples of combined office, residential and food and beverage areas and they are also home to many start-ups and small and medium enterprises primarily driven by millennial employees. This demographic doesn’t want to commute and wants to be centrally located, even at the cost of smaller living spaces.”
The search for the perfect lifestyle becomes an important driver in decision-making. Alya Mahdy, executive director — commercial at Jumeirah Golf Estates, tells PW, “Similar to the trend in other buyer age groups, [millennials] have very specific choices when it comes to buying a home, and are more attracted to modern amenities that complement their lifestyle, the latest architecture and technology, and accessibility to their favourite spots in Dubai.”

Lewis Allsopp, CEO of Allsopp & Allsopp, says that certain age categories have specific preferences for tower or villa accommodation. “Buyers in their 20s prefer the tower-style living as the typical tower-style communities lend themselves to busy and active lifestyles with a huge amount to do on the doorstep,” he tells PW, noting that a typical expat millennial buyer in the UAE is born in the 1980s and roughly 27-35 years old.

Low-rise
A number of low-rise developments have emerged in the UAE in a trend that is said to be in direct response to demand from this demographic. Developers are happy to cater to this requirement. “We are seeing this trend of community living and low-rise developments gaining traction from this demographic. Developers are responding to this trend, particularly in the affordable market segment, partially also because low-rise construction is cost-effective,” says Godchaux.

Examples in the affordable segment include Remraam and the upcoming Town Square by Nshama. In the prime segment, City Walk and the upcoming Bluewaters are among those catering to the trend for destination living. The GCC millennial is particularly interested in the live-work-play spaces. And there are many communities offering G+1 G+2 G+3 apartments.

“They are targeted for savvy investors and the newer second-generation regional demographic who prefer a more European low-rise, pedestrianised development potentially due to the influence of travel and higher education in the West,” says Godchaux. “This is even evident in the rising level of high street retail and food and beverage such as Al Seef, La Mer, Box Park and Outlet Village, among others.”

Villas come into the picture for growing families. Allsopp says, “As millennials gets into their 30s, we are noticing an increasing number are looking towards villa communities as they start to think about raising a family.”

Godchaux agrees that as the family size starts increasing, villas come back into the picture. “Villas, on the other hand, are predominantly for families who prefer privacy, larger gardens and family spaces, nearness to schools and are open to commute to economic clusters,” he says.

Affordability
Affordability is crucial to the millennial story. In many parts of the world, millennials cannot afford to buy property. “Globally, the millennial buyer segment is limited as many face the issue of affordability, while also being averse to putting their roots down in one place, thus preferring the agility of renting,” says Godchaux.

In the UAE and the wider GCC, the millennial buyer is somewhat more empowered. Godchaux explains, “Among regional millennial buyers, we see a marginally stronger inclination to homeownership and a slightly higher share of contributions from the bank of mum and dad to facilitate acquisitions when compared globally.”

Allsopp says that many expats come to work in Dubai as millennials and are eager to get on the property ladder. “Our data shows that 35.9 per cent of our buyers are millennials,” he says. “I would expect that this would be higher if it wasn’t for the high obstacles to entry into the market, namely the size of the deposit and the fees involved.”

He argues that millennials here are quite different from their counterparts in, say, the UK. “It’s quite different to what we are seeing in the UK and I think that is for a number of reasons,” says Allsopp. “To start with, the cost of living is high in the UK, as it is in Dubai. What is different in the UK though is that the average wage is lower, it’s taxed, then there are similar costs to here in terms of rent, car, fuel, food, among other things.

“The millennials in the UK are not in the same financial position as those in Dubai. Added to that, there a numerous studies reporting that the average millennial in the UK is not as concerned with purchasing property or looking long term; they are all about the here and now and spending their income on life and experiences, rather than saving and looking to purchase a property. I think the millennials in Dubai are different, not just because of the difference in earnings, but because of the mentality of a person that moves away from family and friends to make something with their life.”
Mahdy says that the lower interest rates are also a factor attracting buyers. “Due to lower profit rates on home finance, more millennials are buying property than they were previously,” she says.

Developers, for their part, are creating attractive payment plans. “Flexibility in payment plans and ease in acquiring finance for the initial down payment remain key for the mid-income millennials,” says Godchaux.

There is a big push for more affordable housing, while buyers are also looking at the off-plan market, according to Allsopp. “They are attractive properties in great communities and they make a great purchase,” Allsopp says.

Rent a lifestyle
Still, more millennials tend to be active in the rental market. Godchaux says, “They are predominantly dominant in the rental market and relatively limited in the sales market. The shoppers for affordable and mid-income homes are young couples and families wanting to climb up the housing ladder to ownership.”

Godchaux says that some of the lifestyle elements available in some communities are accessible to renters. “Places like Dubai Marina and JLT will remain a preferred option by expat millennials due to the lifestyle, amenities and central location, although predominantly in the rental market.”

7 Feb 2018

Dubai Real Estate Not As Crazy For Crypto As People Think

Dubai is famous for being the mecca of luxury real estate in the Middle East. It was the first market to sell a new development property in Bitcoin.

The Aston Plaza and Residences in Dubai Science Park is the development that made headlines for accepting payment in Bitcoin. The project isn’t even completed yet. Lord knows what one Bitcoin will be worth in the summer of 2019 when buyers get to move in. The world’s biggest cryptocurrency is already down 45% this year alone.

The 50 units that were priced in Bitcoin are nearly all sold out.

Star Business Centre, a part of the Dubai-based Samana Group, has started accepting digital currency as rental payments for their offices downtown.

Dubai launched its first cryptocurrency in October called emCash, making the United Arab Emirates the first country to officially sanction a cryptocurrency. Samana Group will use that coin, along with Bitcoin, as a form of payment.

new-construction

The Aston Plaza and Residences in Dubai: 50 units priced in bitcoin. They’re “nearly sold out,” brokers for the property say.

The Royal Atlantis’ Crescent, located on the manmade Palm Jumeirah, is also accepting bitcoin.

These are big, profile properties in a showy and glam global city. But the Bitcoin market for housing there is not expanding. And the market is not all that interested in seeing it expand.

Many brokers have stopped accepting digital currencies after the UAE’s central bank issued a warning on them in October. Bank president Mubarak Rashed Khamis Al Mansoori said bitcoin is used for money laundering and terrorist finance.

Sameer Lakhani, Managing Director at Global Capital Partners, said in a Gulf News article published Thursday morning in Dubai that “The UAE Central Bank has joined others in warning about the speculative nature of Bitcoin. Since then, clearly there have been increasing calls to regulate it and it is increasingly likely that this will happen.”

nakheel

A Nakheel Properties sign advertises land for sale on Dubai World’s Palm Jumeirah island in Dubai. Payment in bitcoin accepted.

Despite a handful of companies advertising their wares in crypto, a recent industry survey shows 97% of Dubai real estate investors would not buy, sell, or rent a property in crypto. That’s near unanimity.

The survey was conducted this week by Dubai real estate portal Bayut.com.

A slight majority, 52%, said they are not interested in knowing the Bitcoin price on a piece of real estate. Some 79% of Bayut’s survey respondents said investing in crypto as a stand-alone security was a poor investment, though the results may be slightly skewed as only around 20% of the survey respondents considered themselves real estate investors. Half of the respondents were renters, making it unclear as to whether they considered themselves part of any investor class.

UAE is set to launch a Shariah law compliant cryptocurrency called OneGram in June .

7 Feb 2018

Jumeirah Village Circle tops Dubai rental yields

Rental yields in Dubai and Abu Dhabi continue to offer investors globally competitive returns despite flattening prices, says a new report from Propertyfinder.

Jumeirah Village Circle, Discovery Gardens and International City are the three areas of Dubai offering the highest returns for apartments, with average yields of 9.20 percent (per square foot), 8.96 percent and 8.59 percent respectively in October last year – around 0.5 percent down on April returns recorded in April.

For villas, The Springs (6.04 percent), Jumeirah Village Circle (5.41 percent) and Dubai Land (7.26 percent) were the highest-yielding areas in Dubai, with the former and the latter actually enjoying small rises in yields over the April figures.

The Springs return is particularly encouraging considering that sales prices have declined by six percent over 2017.

In Abu Dhabi, Al Reef (8.53 percent) for apartments and Hydra Village (7.52 percent) for villas represented the best places for investors.

Yields tend to matter most to investors as it is about income rather than capital growth. When compared to other major cities around the world. London, for instance, offers investors rental yields of around 3.4 percent per square foot, while Tokyo’s returns are just 2.7 percent.

“Typically, smaller properties produce better rental yields than larger ones,” says Lukman Hajje, Chief Commercial Officer of Propertyfinder Group. “Apartments are better than villas, and studios are better than larger apartments, for example.”

“But also consider location. Newer, emerging communities offer better rental yields than more established communities. Newer cities offer higher rental yields than established cities,” he adds.

29 Jan 2018

Latest News


Dubai realty gets Chinese boost

UAE real estate, particularly that of Dubai, is steadily gaining interest among savvy Chinese investors. This extends to the brick-and-mortar assets, contracting industry as well as construction finance.

The Chinese were the fourth most active real estate investors in Dubai in the first half of 2017, according to consultancy Knight Frank.

A recent Knight Frank report rated the UAE as having the third highest potential among 67 countries to make use of China’s ‘Belt and Road Initiative’. It identified the UAE as the ‘Hub of the Belt’.

Chinese contractors have a big presence among the top 5 contractors in the UAE. They also provide construction finance. The China State Construction and Engineering Corporation ranks as the second biggest contractor in the UAE with projects worth of almost $3 million. It has 16 ongoing projects.

Knight Frank estimates that of the total contract value of future projects in the UAE (both projects in the design and execution phase from 2018-20), Chinese firms account for 6 per cent of total value of contracts. In Dubai, this is slightly higher at 7 per cent and from 2019 to 2020, it is expected to increase from 7 to 9 per cent.

“There are an increasing number of Chinese buyers, however, it’s important to note that we’re not going from a low figure of Chinese investors to a high one. There has always been considerable Chinese investment in Dubai real estate, it’s just that at the moment, we’re seeing more coming in than in recent times. If you walk in to any of the major developers’ sales centres, you will see a large amount of Chinese buyers looking to make a purchase,” says Lewis Allsopp, CEO, Allsopp & Allsopp.

“In the past two decades, more than 8,200 real estate transactions have been completed by Chinese buyers and roughly one quarter of those transactions took place in the past two years alone, bringing in more than Dh3 billion,” explains Jason Hyes, founder and CEO, LuxuryProperty.com.

PH Real Estate estimates that it has seen a 10 to 15 per cent increase in the number of Chinese buyers approaching it.

“Chinese buyers accounted for about 3 per cent of all sales in Dubai in 2017. They are taking a lot of construction projects and bringing in a lot of financing. They are bringing in a lot of their own people as well for these projects. As those people tend to get familiar with Dubai, they will want to buy homes for themselves. That trend is bound to grow,” forecasts Craig Plumb, head of research, JLL Mena.

Identifying China as a sizeable target market, most Dubai developers have tie-ups with Chinese brokerages in mainland China and they spend a lot on marketing on roadshows and exhibitions in China.

“The larger developers in tune with the needs of their Chinese clients. Most developers now have either a Mandarin-speaking department or at least have a marketing strategy geared towards attracting new Chinese buyers,” reckons Myles Bush, CEO, PH Real Estate.

“Emaar, for example, has launched a Chinese website to market its properties and is offering special incentives to investors for Chinese New Year. The government has also launched its own initiatives to promote Dubai properties to the Chinese market. Last year, the Dubai Land Department entered into an agreement with the marketing company behind one of China’s leading property portals to promote Dubai property in China,” Hayes points out.

There are Chinese agents stationed in Dubai as well. “We work closely with a few Chinese agents, one of whom had 20 clients fly in from China last week and who between them bought 13 properties in one week,” says Allsopp.

With Dubai being one of the few global cities where investors can enjoy 8 to 10 per cent on their real estate returns, the Chinese are likely to continue to inwardly invest into the market.

“Chinese buyers are smart investors and they are very aware that it’s a buyers market. The majority of Chinese clients we deal with are looking for high-performing rental returns rather than trophy assets. An example of this over the past week was when my team brought in a commercial floor for sale in DIFC that is currently returning a 9.5 per cent yield; within one day of advertising, seven Chinese buyers called us for more information,” observes Bush.

“Chinese buyers are savvy and know what they want. In the majority of cases, they are investors and cash rich. They are looking in affordable projects, good deals, up-and-coming areas, top locations, etc. Generally, they are looking to tick the boxes of most investors, something that is popular, will provide a good return, should see good capital appreciation and offer a good exit strategy if needed,” concludes Allsopp.

12 Feb 2018

Secondary, off-plan property sales in Dubai continue at a good clip

Contrary to the notion that sales in Dubai have slowed down in January at a noteable rate, a breakdown and analysis of total number of transactions in the secondary and off-plan market shows otherwise.

Ready villas/townhouses
According to Property Monitor data, the number of transactions in the secondary market has remained consistent between October 2017 to January 2018. For villas/townhouses in the secondary market, the total number of transactions between October to December ranged from 167 to 182 transactions per month, whereas in January, 164 transactions were recorded.

For villas/townhouses in the secondary market, the top three areas generating sales volume in October 2017 were Emirates Living with 37 transactions, Arabian Ranches with 27 and Reem (Mira) with 17. Emirates Living witnessed an increase to 50 secondary market transfers while Arabian Ranches remained relatively constant with 25 transactions in January. Between November 2017 and January 2018, Emirates Living and Arabian Ranches remained the top two generating sales volume areas in the secondary market.

In January 2018, the average sales price according to the Property Monitor Index for a villa/townhouse in Emirates Living was Dh2,387,083 for a three-bedroom, Dh3,164,500 for a four-bedroom and Dh6,785,714 for a five-bedroom. While in Arabian Ranches, the average sales price for a villa/townhouse was Dh3,212,986 for a three-bedroom, Dh3,475,000 for a four-bedroom and Dh4,293,648 for a five-bedroom.

Between November 2017 and January 2018, Town Square overtook Reem (Mira) as the top area in sales volume due to its attractive middle-range price point. In January 2018, the average sales price for a villa/townhouse in Town Square was Dh1,612,083 for a three-bedroom and Dh1,913,750 for a four-bedroom.

Secondary market – apartments
Apartments in the secondary market were transacting at a much higher rate with the total number of transactions between October to December ranged from 782 to 851 transactions per month, whereas in January, 706 transactions were recorded.

For apartments, the top three areas generating sales volume in January 2018 were Dubai Marina with 134 transactions, Dubai Sports City with 103 and International City with 92. From October to January, Dubai Marina and International City remained among the top three areas with relatively consistent numbers of transactions.

In January 2018, the average sales price according to the Property Monitor Index for an apartment in Dubai Marina was Dh1,309,216 for a studio, Dh1,243,892 for a one-bedroom and Dh1,931,498 for a two-bedroom.

In Dubai Sports City, the average sales price for an apartment was Dh614,464 for a studio, Dh801,172 for a one-bedroom and Dh1,252,020 for a two-bedroom.

Interestingly, Dubai Sports City almost doubled its sales volume from 54 transfers in October to 103 transfers in January due to an influx of new supply. One of the handovers towards the end of 2017 was Elite Sports Residence 10, which generated 50 secondary transferred sales in January 2018.

Off-plan market
In the off-plan market, there was a slight decrease in the total sales volume for villas/townhouses between October 2017 and January 2018. However, the sales volume for apartments are in line with and consistent with that of 2017. Between October and January, the sales volume for apartments in the off-plan market have ranged from 1,650 to 1,850, except for December which had 2,169 transactions.

The top three areas generating off-plan sales volume for apartments in January 2018 were Meydan One with 227 off-plan transactions, Business Bay with 186 and Jumeirah Village Circle with 168. All 227 off-plan transactions for Meydan One are in Azizi Riviera, with the first phase scheduled for completion in Q1 of 2019.

In January 2018, the average sales price according to the Property Monitor Index for an apartment in Azizi Riviera is Dh519,267 for a studio, Dh855,329 for a one-bedroom and Dh1,396,306 for a two-bedroom.

Similar to Azizi Riviera, the average sales price for an apartment in Jumeirah Village Circle is Dh622,354 for a studio, Dh823,098 for a one-bedroom and Dh1,459,577 for a two-bedroom.

Priced slightly higher, the average sales price for an apartment in Business Bay is Dh1,176,036 for a studio, Dh1,339,818 for a one-bedroom and Dh1,595,294 for a two-bedroom.

13 Feb 2018

Wacky Jenga-style resort that cost £1 BILLION to build set to open its doors in Dubai

  • Work on the Royal Atlantis Resort & Residences started more than four years ago
  • The resort complex will feature a mix of living areas, with apartments starting at a whopping £1.4million
  • There will also be 795 guest rooms with on-site amenities including spas, gyms and fine dining restaurants

Catering to the super-rich, a £1 billion resort complex is set to open its doors on the shores of the Arabian Sea in Dubai.
Work on the Royal Atlantis Resort & Residences started more than four years ago and it is expected to welcome guests in late 2019.
Renderings of the finished design show it looking almost like a game of Jenga, with giant blocks of apartments precariously stacked 43-storeys high.

Work on the Royal Atlantis Resort & Residences started more than four years ago and it set to welcome guests in late 2019

The resort complex will feature a mix of living areas, with apartments starting at a whopping £1.4million

The resort complex will feature a mix of contemporary-styled living areas, with apartments starting at a whopping £1.4million.

But if your bank account doesn’t quite cater to this, perhaps you can just visit the exclusive Royal Atlantis as a guest.

As well as the 231 residences, many of which are decked out with private pools and terraces, there will be 795 luxury guest rooms and suites.

On-site amenities will include a 24-hour concierge, spas, gyms, fine dining restaurants and a private beach club.

There will also be around 90 swimming pools dotted around, so visitors can keep their cool in the desert heat.

The Royal Atlantis Residences’ director, Mr Issam Galadari, said: ‘Taking resort living to new luxury heights, The Royal Atlantis Resort & Residences responds to a calling from a highly discerning, affluent, international demographic seeking a new class of offering, currently not available elsewhere in Dubai’

On-site amenities will include a 24-hour concierge, so you can get cocktails delivered to your private pool

The Royal Atlantis, which is located next to the famed Atlantis resort on Dubai’s man-made palm-shaped island, was masterminded as part of the emirate’s drive to build up tourism revenue.

Commenting on the project, Royal Atlantis’ global sales agent, Maria Morris, said: ‘Our international clientele is outwardly seeking this next level of luxury in the prime market in Dubai, and The Royal Atlantis Residences delivers on all these requirements.

‘Now is the optimum time for property buyers to purchase in Dubai. Stabilizing property prices, infrastructure developments such as the expansion of the Dubai Metro, excellent investment opportunities and a buoyant economy are proving to be a dynamic combination.’

The Royal Atlantis, which is located next to the famed Atlantis resort on Dubai’s man-made palm-shaped island, was masterminded as part of the emirate’s drive to build up tourism revenue

The Royal Atlantis Residences will have views of the Arabian Sea or across the waters of The Palm towards the Dubai city skyline

The Royal Atlantis Residences’ director, Mr Issam Galadari, echoed Morris’ words, adding: ‘Taking resort living to new luxury heights, The Royal Atlantis Resort & Residences responds to a calling from a highly discerning, affluent, international demographic seeking a new class of offering, currently not available elsewhere in Dubai.

‘The high-net-worth global citizen is ready for the new dawn of residential experience. The development will become the new landmark of Dubai and will support the “Dubai Plan 2021” in positioning the city as one of the best places to live in the world.’

The Royal Atlantis Residences will have views of the Arabian Sea or across the waters of The Palm towards the Dubai city skyline.

Dubai, part of the United Arab Emirates, has positioned itself as a destination for over-the-top luxury and opulence.

Tourism is a major source of revenue for the emirate, which is preparing to host the World Expo in 2020.

Dubai, part of the United Arab Emirates, has positioned itself as a destination for over-the-top luxury and opulence. Tourism is a major source of revenue for the emirate, which is preparing to host the World Expo in 2020

 

 

20 Feb 2018

When property prices are no more in square feet

A new trend is becoming evident in the Dubai property market. Investors are placing more emphasis on the entry price of properties as opposed to the price per square foot. For instance, units that were previously advertised below Dh1,000 per sqft are being promoted as below Dh500,000 for studios or Dh1 million for one-beds to encourage takeup.

“Yes, the entry price is becoming important for investors as a key psychological factor in a market increasingly driven by price and competing marketing announcements from a few developers engaged in a race to bottom. Price per square foot is becoming relatively less important because it requires deeper market understanding. Sadly, this is encouraging more of the lower quality stock to be built and marketed at very low price points, where the size and quality are sometimes compromised to achieve that low entry point,” says David Godchaux, CEO of Core Savills, a consultancy.

Developers are also using this strategy to attract end-users to consider purchasing properties that are coming in at a certain price point.

“There is a huge demand from the end-user for affordable housing, whether it is already complete or still under construction. By advertising at under Dh500,000 or Dh1 million, it is appealing to the end-user to show what you can get for under a certain milestone in price,” remarks Lewis Allsopp, CEO of Allsopp & Allsopp.

Some developers use this strategy to hide the fact that their units are relatively smaller in size or that they have a very limited number of units available at that price point.

“Quoting a total price rather than price per square foot is a mere marketing strategy targeting first-time home buyers with one figure, giving a clearer picture on affordability without the need to have to calculate the size multiplied by price per square foot. Savvy investors, however, look beyond the total price or price per square foot. They look for great locations, reasonable unit size, practical layouts, decent quality, fair payment plans, affordable down payments, easy mortgage payments, well-connected infrastructure, good amenities/facilities, the developer’s track record, and, of course, the potential total returns on the investment,” informs Haider Tuaima, head of real estate research at ValuStrat.

This marketing strategy is mostly being used for smaller ticket sizes and targeted at first-time home buyers who were previously unable to afford a property in Dubai due to higher prices per unit. When it comes to mid to upscale properties, investors are still driven by the price per sqft, insist market observers.

“The main reason is that the investor is looking at the final price as his tenant is going to pay him as per 1-bedroom, 2-bedroom, etc., in a specific location. There is no incentive for the buyer to buy a big unit and pay more but get a similar rent. This trend has advanced since 2012, when the market started moving towards more compact units with smart floor plans from some key developers, which allow the unit to be efficient with minimum space lost in corridors and other wasted areas,” observes Sanjay Chimnani, managing director, Raine & Horne Dubai.

Short-term investors are also attracted to the entry price point rather than the cost per sqft. Such marketing strategies are also mostly offered in outer areas.

“Short-term investors are drawn to the outer areas, and yields combined with entry price points are the key factors considered. Indeed, there may be a few good deals to be made, but today’s high return is not always a good indicator of tomorrow’s yields – on the back of the very important supply expected to be handed over in the next 3 years at low price points. In outer areas, this short-term strategy may result in a few disappointed buyers, finding themselves locked between falling rents and decreasing capital values, making their investment illiquid in the mid term,” warns Godchaux.

Meanwhile, long-term investors are more careful, selecting developers with a strong reputation and track record, especially when buying off-plan. Location is also one of the most important factors for these investors, as long-term capital value is more likely to be retained in central areas.
“Investors are intelligent and savvy people. They are not going to purchase something at a low yield or something with little chance of capital appreciation or something with a questionable exit strategy just because it is advertised at being under a certain price point,” explains Allsopp.

Discerning investors in Dubai consider location, occupancy in the area, price, size, net yields and payment plans before making a purchase.

“Investors are becoming more conscious of the full life-cycle of their investment [rather than just counting on the short-term capital appreciation followed by the exit]. Hence, they are more interested in the quality of construction, amenities, connectivity, service charges, rental potential and exit options,” says Ivana Gazivoda Vucinic, head of consulting and valuations and advisory operations, Chestertons Mena.

Meanwhile, sellers are adapting to the new market reality. “This is evident through the constant downward correction in prices to meet the current demand and investors’ price sensitivity,” adds Vucinic.

20 Feb 2018

Dubai’s real estate slump to last until 2020 – S&P

DUBAI, Feb 20 (Reuters) – Dubai real estate prices could decline by 10 to 15 percent over the next two years, hit by new supply, geopolitical risks and the introduction of value added-tax in the United Arab Emirates, S&P Global Ratings’ analysts said on Tuesday.

The grim prediction came after Dubai residential prices fell by 5 to 10 percent in 2017, and the weak property market has also begun to hurt earnings of the emirate’s top property developers.

“We believe this correction will continue at least for this year and next, before prices stabilise in 2020 at the earliest,” said Sapna Jagtiani, S&P’s credit analyst for corporate and real estate ratings.

Rents in both residential and retail markets will also remain under pressure, and hotels will be forced to accept lower average daily room rates to maintain occupancy levels, S&P said.

Property prices are down 16-19 percent from their peaks of over three years ago, National Bank of Kuwait said in a report this month.

Jagtiani told reporters that Dubai’s Expo 2020 could benefit the property market due to the potential increase in economic activity on the back of the expected arrival of 25 million visitors and new residents.

However, she cautioned the property sector ran the risk of “overbuild,” the effects of which would be felt beyond 2020.

Property consultancy Jones Lang LaSalle’s 2017 report suggested the planned residential supply in Dubai would grow by 9 percent in 2018 and 7 percent in 2019.

Emaar Properties reported a 16 percent slide in fourth-quarter net profit on Feb. 14, as costs weighted on Dubai’s largest listed developer.

It followed results from fellow developer DAMAC Properties that showed a nearly 47 percent plunge in net profit for the quarter.

Jagtiani said geopolitical risks, such as the standoff between Qatar and some of its powerful Gulf neighbours, would weigh on sentiment, even though Qatari investors were not among the top 10 property investors in Dubai.

Qatar, a tiny but rich Gulf Arab state, has been isolated over the past seven months by trade and travel sanctions imposed by Saudi Arabia, the United Arab Emirates, Bahrain and Egypt over accusations – denied by Doha – that it supports terrorism and regional rival Iran.

Jagtiani said the real estate downturn would not be as severe as that experienced in 2009 due to prudence among lenders and tighter regulation of the property market.

House prices in Dubai in 2009-2010 plunged more than 50 percent from their peaks, pushing Dubai close to a debt default.

20 Feb 2018

Dubai property market ‘continues to show growth’, says Damac’s Sajwani

Dubai’s property market continues to show signs of growth with increasing demand returning to the market, according to Damac Properties chairman.

The luxury developer reported a net profit of $762 million in its yearly profits announced earlier today (a drop of 25% on last year), which was based on sales worth $2 billion (AED7.5bn) during the year.

Hussain Sajwani, chairman of Damac Properties, said the company’s yearly figures showed there was a “returning demand” in the property market in the emirate, adding that the company’s outlook was positive in the medium to long term.

“Dubai’s property market continues to show growth as increasing demand returns to the market, and this is reflected in our booked sales,” said Sajwani.

“Our medium to long term outlook remains positive, with continued local demand as well and stronger interest by international investors. Our major projects in Dubai including Damac Hills, Akoya Oxygen and Aykon City continue to appeal to expats and international investors alike, while our diverse product portfolio continues to attract a wide variety of buyers for our off-plan and ready properties,” he added.

Damac delivered 20,236 units as of December 31 2017, which it described as “a milestone for the company and the industry as a whole.”

Construction continues on over 6,500 villas, apartments at Akoya Oxygen, along with its golf course, and community infrastructure. The community’s amenities, including wellbeing facilities, retail outlets, as well as hospitality, food and beverage elements, are in various stages of planning and progress.

14 Feb 2018

What oil price reverse means for Dubai property

As we close the books on Q4 of 2017 and reflect on the most recent quarter, it’s clear that major political events to the west, and OPEC oil controls limiting production, have put pressure on and spooked the UAE market.

Why is it the market continued to weaken in 2017? The macroeconomics largely come down to world affairs and basic supply and demand.

The UAE’s economic growth will accelerate to 4.4 per cent in 2018 as global growth is expected to pick up steam from 2017, driven by rebound in investment, manufacturing and trade, as reported by the International Monetary Fund (IMF).

Raising its outlook for the global economy, the IMF said in its latest World Economic Outlook that growth is expected to rise to 3.6 per cent in 2018, with: “buoyant financial markets and a long-awaited cyclical recovery in manufacturing and trade under way.

Stronger activity and expectations of more robust global demand, coupled with agreed restrictions on oil supply, have helped commodity prices recover from their troughs in early 2016.”

For the seven oil-exporting countries in the Middle East, the UAE’s real GDP growth forecast, which was cut to 1.5 per cent in 2017 is seen accelerating to 4.4 per cent in 2018, at the fastest pace in the region as expected by the IMF.

The UAE economy has been resilient to the impact of the slump in oil prices as it has benefited from a relatively diversified economy, excellent infrastructure, political stability and ample foreign assets, according to the Institute of International Finance.

The introduction of VAT five percent has further diversified revenues. The move is expected to bring higher inflation, at least temporarily. The short-term impact will be offset by the long-term benefit VAT will bring to the regional economies.

There is an urgent requirement to diversify government revenues. VAT is a measure that will allow more stability, given that the outlook for crude prices remains volatile.

Although oil plays a major role in the availability of credit from banks and many buyers in Dubai real estate are from countries solely dependent on oil, the impact is not that significant. From a buyers perspective, this is a good time to buy real estate in Dubai, because of lower prices and steady yield, and once the oil price starts to rebound this will only further a positive impact on the real estate price.

19 Feb 2018

Dubai property price declines set to continue until 2020

A three-year downturn in Dubai’s property market will likely continue until at least 2020, Standard & Poor’s said Tuesday, citing low oil prices, the introduction of VAT and a Gulf diplomatic crisis.

A glut of housing units and weak demand were also key reasons for the decline, the credit ratings agency said in a report.

The emirate’s real estate sector has been on the slide since 2014, when crude oil prices crashed, dealing a harsh blow to many Gulf investors.

Home prices dropped more than 15 percent between then and mid-2017.The downward trajectory continued through to the end of last year, the S&P report said, with prices of residential units falling a further five to ten percent.

It said the introduction of a value added tax and a prolonged crisis between Qatar and its Gulf neighbours, including the United Arab Emirates, had also put pressure on real estate prices.

S&P called the downturn a “correction” but said the sector may start to bounce back when Dubai hosts a six-month World’s Fair in 2020.

“We believe this correction will continue at least for this year and next, before prices stabilise in 2020 at the earliest,” it said, adding that rents will likely follow the same trend.

Dubai’s Expo 2020 is expected to attract up to 300,000 visitors a day when it opens in October 2020.

Experts have predicted it will also create around 300,000 new jobs and attract new residents in the emirate city, which currently has a population of three million.

Dubai is slated to spend some $7 billion (5.7 billion euros) on infrastructure projects and $2.9 billion on the expansion of the metro route to the exhibition between now and event’s inauguration.

The property sector and related activities form around 13 percent of Dubai’s gross domestic product, which was $108 billion at the end of 2017.

Between December 2015 and June 2017, overseas investors put up as much as $41 billion to purchase property in the emirate, said the Dubai Land Department in August.

20 Feb 2018

Off-plan sales dominate Abu Dhabi housing market

Off-plan sales are driving the Abu Dhabi housing market as the emirate continues to feel the effects of diminished government spending and sluggish economic growth, according to a new report from international property company Chestertons MENA.

According to the report, off-plan sales activity remained high in Q4, with developers rolling out a number of incentives to attract buyers. The secondary housing market, however, saw a 2 percent decline in apartment sales prices and a 1 percent decline in villa prices, with GCC and Arab nationals dominating both markets.

“Throughout 2017, we saw the effects of a number of economic factors, including low oil prices, reduced government spending, increased stock in the secondary market, a rising cost-of-living and redundancies,” said Ivana Gazivoda Vucinic, head of consulting and research at Chesterstons MENA.

On average, apartment sale prices fell by 2 percent during Q4, with certain areas experiencing a more pronounced decline, such as Reem Island (5 percent), which Chestertons said is a reflection of waning demand.

Saadiyat Island, on the other hand, registered the steepest increase – 5 percent – in apartment sales prices for a second consecutive quarter, partly fuelled by the inauguration of the Louvre Abu Dhabi. On average, prices increased rom AED 1,362 per square-foot to AED 1,430 per square foot on the island, while Reem Island prices fell from AED 1,362 per square foot to AED 1,242 per square foot.

Additionally, average villa sales prices fell by 1 percent in Q4, with the Al Raha Beach Area falling more than 4 percent from AED 1,348 per square foot to AED 1,282 per square foot.

Abu Dhabi’s rental market demonstrated similar trends, with an overall decline in rental prices of 2 percent and 1 percent for apartments and villas, respectively, echoing results from the previous quarter.

“Shrinking company housing allowances and excess rental supply exerted downward pressure on rental prices in the emirate,” Vucinic added. “Vacancies in some locations, such as Al Raha Beach, surged over the quarter as residents downsized their accommodation or moved to more affordable communities.”

Downsizing, however, was positive news for investors, with rents for one-bedroom apartments in Al Khalidiya rising by 7 percent.

In the villa market, Al Reef and Reem Island emerged as preferred locations. In Al Reef, for example, a typical three-bedroom villa could be rented for AED 120,000 a year, with preferential leasing terms for some residents.

In overall terms, the mix of high-performing areas changed in Q4, with Saadiyat Island being the best performing area in the apartment segment and Khalifa City showing positive trends in the villa segment. Mohammed bin Zayed City registered the highest increase in villa rents at almost 2 percent, bucking the wider market trend.

“There is a likelihood of positive economic sentiment emerging from ADNOC’s recent announcement to invest $109 billion in growth strategies,” Vucinic noted. “This plan could be the turning point for Abu Dhabi’s real estate sector as it could generate new jobs and therefore renewed demand for residential property.”

8 Feb 2018

Middle East real estate tycoon warns of a rocky 2019 — but says region is ripe for investment

  • A mogul of Middle East real estate development, Emaar Properties Chairman Mohamed Alabbar, said that the region has plenty of development opportunities despite geopolitical tensions.
  • “If I was to look at the region as a whole I’m still positive,” he told CNBC at the Milken Institute MENA Summit in Abu Dhabi on Wednesday.
  • However, he cautioned investors to remain prudent in the longer term.

A mogul of Middle East real estate development, Emaar Properties Chairman Mohamed Alabbar, said that the region has plenty of development opportunities despite geopolitical tensions and difficulties doing business.

“If I was to look at the region as a whole I’m still positive,” he told CNBC at the Milken Institute MENA Summit in Abu Dhabi on Wednesday. However, he cautioned investors to remain prudent in the longer term.

“I’m just careful about what is 2019. I’m just worried that we’ve been having a good time for too long. So I just hope that 2019 goes well … So make sure your balance sheet and debt level is at reasonable levels, so if there’s a shake-up you can handle it,” he said.

Emaar Properties is a real estate development company based in the United Arab Emirates (UAE) which is responsible for developments throughout the country and the wider Middle East, and beyond.

Founded in 1997, Emaar Properties has been responsible for much of the development of Dubai, including the iconic Burj Khalifa, the world’s tallest building. It has also developed shopping malls and residential property, hotels and entertainment venues.

The real estate firm also has developments further afield such as in India and Pakistan.

Speaking to CNBC, Alabbar summarized the outlook for the company.

“My view is that Morocco is doing well for us, I would say Egypt is doing extremely well; Saudi Arabia with all the restructuring going on, it’s going to be a fabulous opportunity. In the UAE, we still expect to grow 20 percent on an annual basis,” he said, noting that the company’s growth in India was recovering and Pakistan was doing “reasonably well” for the firm.

Alabbar said the company had achieved around $5 billion of sales in 2017 and close to $1.8 billion of net profit before depreciation, with the company growing around 20 to 25 percent on an annual basis.

“Trust me, the margins, the opportunities and the growth I’ve been having in the Middle East over the last 20 years — even if you make a mistake, it’s so worth it,” he said, although he noted doing business in the wider Middle East had its challenges.

“Of course if I’m doing business in the UAE, it’s comfortable, it’s safe. But if I have to go to Cairo (in Egypt) I have to know the government, I have to know the mayor of Cairo, the mayor of Alexandria. But that’s what we do, that’s what we’re paid for, that’s what we have to do to grow our business,” he said.

The Middle East is certainly not a region for the faint-hearted. There is ongoing geopolitical turbulence caused by the continuing conflict in Yemen, uncertainty in Syria and Iraq about the possible resurgence of terrorist group Islamic State and internal disputes within the Gulf Cooperation Council (with Qatar being sidelined by Saudi Arabia, Bahrain, the UAE and Egypt), not to mention perceived proxy wars between Saudi Arabia and Iran.

Couple these issues with economic instability, prompted by the lower oil price, and there’s a combustive mix for most businesses. Alabbar said it was nothing new, however, and that the region was ripe for real estate development and infrastructure investment.

“I think that what the Middle East is going through is, unfortunately, not new … But the truth is that the opportunities exist — there are millions of people who have to go to school, they have to shop, they have to find jobs and open new factories, there’s tourism, so therefore that will contribute to economic growth in the whole region.”

Asked about Emaar Properties’ balance sheet, Alabbar said there had been difficult times.

“2007, 2008 and 2009 was very painful and I try not to forget the lesson. And I deal with bankers with a lot of respect but when they come and tell me ‘your balance sheet is not very efficient’ I know that I’m doing a good job. So I like to keep my debt at a very reasonable level. Then again, we have to do business, we have to be aggressive but at the same time we have to keep our eye on the cycle.”

8 Feb 2018

World’s next tallest hotel set to open in Dubai

Dubai: Shaikh Zayed Road will continue to host the “world’s tallest hotel”, with the opening this week of the Gevora built by the Al Attar Group.
The 75-floor structure stands at a height of 356 metres (1,167.98 feet) and has 528 rooms. It is located right near the DIFC cluster and with the Emirates Towers as neighbours.

Gevora and the Al Attar Group hope to take over the world’s tallest hotel mantle from the JW Marriott Marquis Hotel just down Shaikh Zayed Road, which soars to 1,165 feet. The property opened in 2012 and has 1,608 rooms.

Dubai has two other entrants in the tallest hotel stakes, in Rose Rayhann, which stands tall at 1,093 feetk and the Burj Al Arab, at 1,053 feet.
The Al Attar Group has multiple high-rise interests along Shaikh Zayed Road.

Most of the other hotels in the tall rankings are dominated by Chinese developers and their flagship hotel projects.

Gevora’s opening on February 12 will allow for a better balance to be struck between Dubai and China in hosting these eye-catching landmarks.
The Al Attar Group has multiple high-rise interests along Shaikh Zayed Road; in fact it was among the handful of developers who moved in with projects just as the location on either side was coming into prominence in the early 2000’s.

Shaikh Zayed Road shot into prime time prominence with the Emirates Towers, which opened in April of 2000. Prior to that there were just the towers on the opposite side of the Road and near the Crowne Plaza.

Then the freehold boom started in Dubai in earnest and the Burj Khalifa and the many signature towers within the DIFC cluster came into being. And later on there was Business Bay and its line-up of Executive Towers.

Now that the Gevora is all set to open its doors, what next for Dubai’s Shaikh Zayed Road? Is there space left for new builds on what is already an area with the highest concentration of high-rises?

There could well be new possibilities taking shape, with the Dh5 billion Emirates Towers Business Park as a possible destination. And further down the Road, there will be two “super-tall” structures forming part of “Uptown Dubai”, which will be built by the Jumeirah Lake Towers developer DMCC.

10 Feb 2018

Time for Dubai realty investors to get back into luxury

Despite the popular global assumption that the majority of Dubai’s real estate stock and transaction volumes are concentrated in the prime/luxury end of the market, this sector represents just a small portion of the residential market. In fact, only 3 per cent of all residential transactions in 2017 were concluded within this segment.

This may come as a surprise given Dubai’s image as an expensive metropolis with a robust luxury property market. But it is less paradoxical when one considers the large amount of stock that has transacted in the mid- and affordable segments over the past 12 months, overshadowing the prime market that just a few years ago was firmly in the limelight.

In any anomaly one may find opportunity. however, as the market continues to be flooded with new stock in the lower end, the prime/ultra-prime segment may provide better prospects for investors in the coming few years.

Prime and ultra-prime property prices in Dubai are now among the lowest of any comparable global hub. This stance is further intensified by the varied level of price softening witnessed over the last three years across all segments of the market. Prime properties in Dubai are approximately 40 per cent less expensive than Singapore and 50 per cent less than Moscow and Paris.

Dubai’s ultra-prime market is also relatively inexpensive compared to the likes of Shanghai and Tokyo, with average prices almost 60-70 per cent lower, and presents excellent value against prices per square metre in London and New York.

The long-term investment potential in Dubai’s prime segment is reinforced by a nominal tax regime and notably low real estate investment costs. These costs — associated with buying, holding and selling property — can detract significantly from an investment and essentially erode the attractiveness of an asset.

Cities such as Hong Kong carry investment costs of approximately 32 per cent, while costs in Singapore and Tokyo are nearly 20 per cent, representing an additional charge equivalent to almost a quarter of the value just to buy, sell or hold property. With notably low buying and selling fees, and almost no holding charges, investment costs in Dubai amount to just 8 per cent — comparable to Shanghai and Mumbai.

Although these costs are often overlooked by investors, they have a significant impact on any comparison of prospective investment yields in different cities across the world.

The trickle-down effects of continued low oil prices, a strong US dollar and continued geopolitical turbulence have collectively cast a significant dent in the absorption levels in prime stock. However, the upcoming supply pipeline is modest in this sector, with most new stock concentrated in the low-to-mid market segment — an upsurge created on the back of projected demand from Expo 2020.

Given Dubai’s position as a global tourist destination and regional economic hub within five hours flying time of around one third of the world’s population, strong underlying demand for prime and ultra-prime properties is expected to be sustained in the long run.

As the market expands and continues to mature, gaining depth and liquidity in line with population growth, it is likely that demographic pressures will continue to mould the cityscape in a way that accentuates the pull of core areas. These “city centres”, shaped by demographics just as much as by master planning, will also see natural price appreciation driven both by desirability and spatial limitations.

Prime and ultra-prime segments will be the direct beneficiaries of this in terms of price appreciation and stability, although it will also likely trigger further yield compression, positioning Dubai on a par with other global hubs.

At the other end of the spectrum, in most outer areas that are being flooded by lower-priced projects and are free of land constraints, even optimistic demographic growth will be insufficient to drive notable midterm price appreciation, creating a widening gap with prime and ultra-prime prices in central areas.

10 Feb 2018

Articles

All you need to know about registering for VAT?

Dubai: According to the executive regulations on value added tax (VAT) published last week, the mandatory registration threshold is Dh375,000.

This means that anyone with a turnover of Dh375,000 or more is required to register their business for VAT, the Federal Tax Authority (FTA) and Ministry of Finance (MoF) said in the recently release regulations.

The voluntary registration threshold is Dh187,500, with companies of that size or above able to register for VAT too.
The failure of a taxable person or business to submit a registration application within the time frame specified in the tax law is liable for a Dh20,000 fine.

Also according to the executive regulations, companies are able to register as a tax group.

Through this mechanism, more than one company can register for VAT as a group, under a single common control, according to Dubai-based Jitendra Consulting Group. They say that the main benefit of group registration is to simplify the procedures and save costs through consolidated tax returns and a single VAT registration.

The group’s tax returns and payments are carried out by the member who acts as a representative of the group, the FTA has stated. All the members are jointly liable, however.

VAT rules VAT rules

VAT rules

 

6 Dec 2017

UAE’s Federal Tax Authority announces full VAT supplies list

The Federal Tax Authority (FTA) has announced the supplies that will be subject to Value Added Tax (VAT) as of January 1, 2018, revealing selected sectors that will be assigned zero-rated tax, such as education, healthcare, oil and gas, transportation and real estate.

Selected supplies in sectors such as transportation, real estate, financial services will be completely exempt from VAT, whereas certain government activities will be outside the scope of the tax system (and, therefore, not subject to tax).

These include activities that are solely carried out by the government with no competition with the private sector, activities carried out by non-profit organisations.

The UAE Cabinet is expected to issue a decision to identify the government bodies and non-profit organisations that are not subject to VAT.

The below table outlines all supplies that will be subject to the 5% Value Added Tax, as well as zero-rated supplies and exempt supplies:

VAT in education

UAE vat in all sectors

 

6 Dec 2017

Can you buy a home with Dh10,000 salary in Dubai?

There is a property for every income bracket in Dubai. The lower sales prices and attractive payment plans offered by developers in Dubai are resulting in more first-time home buyers hopping on the property bandwagon. The introduction of new innovative mortgage products by some local banks has also contributed towards this increased activity.

Even someone with a salary of Dh10,000 can climb onto the property ladder today, provided they can arrange for the up-front payment and registration charges.

home buying plan

“There are enough properties available to cater across a wide range of salary brackets. Prices and accessibility criteria for a home mortgage, traditionally the two biggest barriers for new entrants to the property market, have been lowered, thus resulting in an uptick in market activity,” says Lynnette Abad, partner and head of Property Monitor/Cavendish Maxwell.

Apartments are the achievable properties for salaries between Dh10,000 to Dh15,000.

qouate

“The average one-bedroom apartment in new residential areas such as Dubai Silicon Oasis, Liwan, etc., is worth about Dh600,000 with a down payment of Dh150,000 and Dh30,000 in registration expenses. The buyer has to pay about Dh2,200 a month. This is easily achievable for most people earning Dh15000+ a month. This is much less than their rent,” suggests Sanjay Chimnani, managing director, Raine & Horne Dubai.

This year, the top areas for affordable properties to one with a monthly salary of Dh10,000 are (in order) International City, Jumeirah Village Circle (JVC), Al Furjan and Dubai South, estimates Property Monitor, a real estate intelligence platform.

For someone with a monthly salary of Dh15,000, the top areas with affordable properties are Dubai South, JVC, Business Bay and Dubai Sports City, the consultancy adds.

However, if you are looking to buy a villa or a townhouse, it would require a monthly salary of Dh25,000. “It will fetch you a townhouse in master-planned communities such as Town Square and Reem, Mira. Some of the other top areas in this salary bracket are Dubai Marina, Business Bay and The Lagoons,” informs Abad.

The challenge for most buyers is to arrange for the down payment plus registration costs of about 30 per cent. “If this was to be reduced to 15 per cent, we would see an even greater shift to ownership in this market,” suggests Chimnani.

However, the moot question is whether a person earning Dh10,000 a month is eligible for a mortgage. Provided the customer does not have any major loans (personal, credit card and auto), s/he would be eligible for a house loan of up to 25 years, subject to age criteria which restricts payments to the age of 65.

“People earning Dh10,000 and above can apply for a mortgage. The minimum salary requirement for a mortgage is Dh10,000. However, there are only a few banks who do mortgages for clients with Dh10,000 income and, therefore, options for these clients are limited. Majority of the banks require a minimum salary of Dh15,000 and above,” says Carol Monis, head of mortgages, MortgageMe.ae, a group of mortgage brokers in Dubai.

She adds that “most of our mortgage clients are end-users who fall into an income bracket of Dh20,000 to Dh25,000”.

Dhiren Gupta, managing director, 4C Mortgage Consultancy, adds in the same vein that the average income group buying property in Dubai is around Dh25,000 to Dh35,000 and they are primarily buying mid-priced property worth of Dh1.5 million to Dh2 million.

“With such income, they can easily qualify for a loan, barring they do not have pre-existing liabilities and age limitation is not a barrier. Moreover, banks are more comfortable to funding such profiles wherein the property will be utilised for self-use,” concludes Gupta.

3 Dec 2017

Sheikh Mohammed signs VAT Executive Regulation

The Ministry of Finance, MoF, Monday announced that His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, signed the Executive Regulation for the Federal Decree-Law No. (8) of 2017 on Value Added Tax, VAT.

The Regulation defines VAT as the 5% tax imposed on the import and supply of goods and services at each stage of production and distribution, including what is a deemed supply, with the exception of specific supplies subject to the zero rate and what is exempted as specified in the Decree-Law.

The tax will go into force effective January 2018, and all business have to take all necessary measures to avoid the risk of non-registration by 1st January, 2018, which would entail fines as stipulated in Cabinet Decision No. 40 of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE.

Commenting on the milestone, Younis Haji Al Khoori, Undersecretary of MoF, said, “Today’s signing of the Executive Regulation by the Vice President, Prime Minister and Ruler of Dubai, His Highness Sheikh Mohammed bin Rashid Al Maktoum, marks a new milestone in the application of an efficient taxation system in line with best international standards with the ultimate objective of improving performance of primary sectors and enhancing social welfare.”

The first title of the Regulation includes the definitions of terms used, while the second title deals with supply, which includes articles regulating the supply of goods and services, as well as supplies that consist of more than one component and the exceptions related to deemed supplies.

The third title of the document tackles the subject of registration, such as mandatory and voluntary registration, related parties, conditions to be met to register tax groups and appointing a representative member, deregistration, exception from registration, registration on law coming into effect and obligations to be met before deregistration.

Meanwhile, the fourth title looks into rules relating to supply, including articles on the date of supply, place of supply for goods, place of supply of services for real estate, transport services, telecommunications and electronic services, intra-GCC supplies, the market value, prices to be inclusive of tax, discounts, subsidies and vouchers.

Furthermore, title five discusses profit margins and explains how to calculate VAT based on profit margins, while title six addresses zero-rated goods and services, including telecommunications, international transportation of passengers or goods, investment grade precious metals, new and converted residential buildings, as well as healthcare, education and buildings earmarked for charity.

Title seven clarifies provisions relating to products and services exempt from value added tax, namely: the supply of certain financial services as specified in the Executive Regulation, the supply of residential (non-zero-rated) buildings either by sale or lease, the supply of bare land, and the supply of local passenger transport.

The eighth title of the Regulation then addresses accounting for tax on specific supplies and includes articles relating to supplies with more than one component, general provisions in relation to import of goods and applying the reverse charge on goods and services, as well as moving goods to implementing states and imports by non-registered persons.

In title nine, the Executive Regulation address Designated Zones in article (51), while title 10 provides further detail on calculating due tax, recovery of input tax relating to exempt supplies, input tax not recoverable, and special cases for input tax. The following titles 11 includes article (55) on apportioning input tax and article (56) on adjusting input tax after recovery, whereas title 12 addresses the capital asset scheme in article (57) and adjustments within the capital asset scheme in article (58).

Title 13 of the Regulation includes article (59) on tax invoices, article (60) on tax credit notes and article (61) on fractions of the fils. Then in title 14, the Executive Regulation discusses Tax Periods and Tax Returns, before title 15 goes into recovery of excess tax in article (65). Adding to that, title 16 tackles recovery in other cases and includes article (66) on new housing for nationals, article (67) on business visitors, article (68) on tourists and article (69) on foreign governments.

The 17th title includes article (70) on Transitional Rules, article (71) on record-keeping requirements and article (72) on keeping records of supplies made. Meanwhile, the 18th and final titles discusses closing provisions.

28 Nov 2017

Real estate risk allocation and insurance tips for Dubai property investors

As an owner-occupier, your primary risk would be damage or destruction to your real estate asset. As such your insurance will likely be for a lump sum amount or full replacement or reinstatement of the asset. Owner-occupiers may also insure for business interruption to cover them for lost income when the premises becomes unusable due to damage. This may be important, for example, where the owner has a mortgage and would have difficulty in meeting the repayments.

An owner would generally take out insurance for third-party risks: for example, where a visitor suffers an injury caused by or occurring on the real estate asset. In transferring ownership of a real estate asset, the buyer and seller will need to establish a clear date for the risk of damage or destruction of the real estate asset to pass. The logical time for the passing of this risk is the date the title is transferred. Generally the seller will cancel the insurance on this date and the buyer will implement its own insurance. There may also need to be a clear position in the sale-and-purchase contract as to what may happen should damage occur between the date of contract and the date of title transfer.

Where a real estate asset is tenanted, the lease contract may expressly address the allocation of risk between the landlord and the tenant and require the parties to obtain insurance.

It is not possible to map out all of the possible variations in such arrangements, however, the following represents a fairly typical allocation of risk and insurance in a retail/office unit context.

Fit-out period
The landlord will generally require the tenant to have or procure contractors all risk insurance as well as worker’s compensation insurance. The landlord will generally require that the landlord is named co-insured and specify the level of cover the tenant must obtain or procure.

Typically the insurance undertaken during the fit-out period will be obtained by the contractor completing the fit-out. The tenant will need to ensure that this insurance is obtained and contains the relevant covenants sought by the landlord under the lease agreement.

Damage and destruction of the building
The landlord would normally obtain all risk building insurance but may require the tenant to insure for damage arising out of the tenant’s or occupiers’ negligence. This could result in double insurance and an alternative approach would be for the tenant to be named as a beneficiary of the landlord’s insurance. This is, however, not the practice in the region.

Landlords will typically exclude liability for any other types of losses sustained by the tenant — for example, economic losses when the tenant is unable to operate from the premises. Were the landlord to face a claim by the tenant in these circumstances, it may be that the landlord’s third-party liability insurance provides a measure of protection to the landlord. As the landlord will exclude liability for the same, the tenant may wish to obtain insurance for business interruption.

As the landlord will be required to cease charging rent for the period the premises cannot be occupied, the landlord may wish to obtain loss of income insurance.

It is common in the context of a commercial office or retail unit lease that the tenant would meet the landlord’s insurance costs as part of the service charges charged to the tenant.

Tenant contents damage
The landlord may specifically require the tenant to insure the tenant’s contents, fixtures and fittings and to name the landlord as co-insured and/or require the insurer to provide a waiver of its right to sue the landlord in any case where the landlord’s negligence causes the damage.

Third-party injury
Third-party injury claims are civil wrongs and accordingly the party claiming damage or injury does not need to establish a relationship in contract with the party causing the harm. Generally, such claims will arise due to the party in control of the area not taking due care to ensure that areas are kept safe.

Accordingly a landlord may wish to insure for any injuries that may occur to third parties in common areas of a building. As the tenant may also exercise control over their premises, the tenant should also take out insurance for such claims.

Other third-party risks
Other third-party risks arise in multi-tenanted buildings in that if a tenant damages the building, this may cause losses to other tenants. The landlord can seek to exclude liability for such claims in the contract with each tenant, but would very likely also cover such risks through their own third-party policies.

As a tenant will have no ability to mitigate the possibility of claims from other tenants in contract, the tenant would need to obtain its own third-party policy to cover such risks.

Developers, investors
Throughout the construction of a project, the contractors will undertake the necessary insurances. As the developer will be paying progress payments throughout the construction, it is in the developer’s interest to ensure that this insurance is in place and that the developer is also co-insured under the contractor’s policy. It is also important to specify clearly under the construction contract when the developer shall be required to accept risk for the property following completion of construction and, therefore, should obtain its own insurance.

If the project involves off-plan sales, then, once the development is completed, the developer will start handing over the units to the investors. Generally, in the case of jointly owned (strata) property, insuring the building, including the usual fitting and fixtures in the units, would be the responsibility of the owners’ association (OA). In cases where there is not a legally established OA, then it may be possible for the developer to obtain a policy that nonetheless recognises the interests of investors as beneficiaries of the policy.

The developer or the OA will need to consider the type of policies they obtain. Generally speaking, such insurance will cover, and may be required to cover by law, full replacement and reinstatement, third-party liabilities and could cover loss of income or alternative accommodation costs.

Investors would typically insure their own contents and improvements. Investors may also wish to obtain loss of rent insurance or insurance covering the cost of alternative accommodation if this is not taken out by the developer or OA.

Summary
This is a general discussion of the risks in real estate and how they may be addressed in contract and through appropriate insurance. As each property and transaction is different, the risks and insurance solutions may differ so it is important that each transaction is assessed on a case-by-case basis. Accordingly, this article should not be treated as advice as to what is required in any particular set of circumstances.

Reporting by Jeremy Scott and Justin Carroll

Jeremy Scott is partner, real estate, and Justin Carroll is senior associate, insurance, at Al Tamimi & Company. The views expressed here are their own.

29 Nov 2017

Not renewing tenancy contract in Dubai? 3 months notice a must

I have been staying in a rented apartment for around last 12 months and do not want to renew the tenancy for another year. I have notified the landlord by giving one month notice of my intention but the landlord insists a notice period of three months. Further, the landlord is asking me to paint the apartment. Surely that comes under wear and tear of living in a rented apartment? What does the law say exactly as I have been reading contradictory reports?

Pursuant to your questions, we assume that the rented apartment where you are staying is situated in the Emirate of Dubai. All tenancy contracts in the emirate fall under the ambit of the Law no. 26 of 2007, Regulating the Relationship between Landlords and Tenants in the Emirate of Dubai. Subsequently some provisions of the said law have been amended by Law No. 33 of 2008.

Article 14 of the law states: “Where either of the two parties to the lease contract do not wish to renew the contract or wish to amend any of its terms, such party must notify the other party of such intent no less than ninety days before the date on which the lease contract expires, unless otherwise agreed by the parties.”

Moreover, Article 14 of amendment states: “Unless otherwise agreed by the parties, if either party to the Tenancy Contract wishes to amend any of its terms in accordance with Article 13 of this law, that party must notify the other party of same no less than ninety days prior to the date on which the tenancy contract expires.”

In the event your tenancy contract states that you need to provide a three months of notice period not to renew the tenancy contract, then Article 14 of Law No. 33 of 2008 should be applicable.

You are bound to return the apartment to the landlord in the same condition as provided by the landlord at the time of renting it to you, other than normal wear and tear. This is in accordance with Article 21 of Law No. 26 of 2006 regulating the Relationship between Landlords and Tenants in the Emirate of Dubai, which states: “Upon the expiry of the term of the Lease Contract, the tenant must surrender possession of the real property to the landlord in the same condition in which the tenant received it at the time of entering into the lease contract except for ordinary wear and tear or for damage due to reasons beyond the tenant’s control. In the event of a dispute between the two parties, the matter must be referred to the Tribunal to issue an award in this regard.”

Know the law

Where either of the two parties to a lease contract do not wish to renew the contract or wish to amend any of its terms, such party must notify the other party of such intent no less than 90 days before the date on which the lease contract expires, unless otherwise agreed by the parties.

 

17 Oct 2017
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