August 2013 - eZine

Last month at a glance: • • • •

Dubai: Property Prices and Rentals Increase Rapidly in Q2 Over 10,000 Hotel Rooms Being Added in Dubai Dubai Property Developers to Issue Bonds for Financing Projects Tough Times for Qatar Property Firms

Issue No. 8 - August 2013

Hong Kong

International property market

Latest From the Economy

Prices Drop for Building Materials in Abu Dhabi in June Dubai’s Stock Index Rallies Highest in Five Years Luxury Goods Can Fetch Return on Investment UAE: Low Arrival Rates Attributed to Ramadan not MERS Corona Virus Dubai Freehold Property

Arabian Ranches, “Desert Paradise” International Property Markets

International Property Markets - Hong Kong Real Estate Investing Lessons

Lesson 6 - Finding the Right Property – Where, When and How to Decide

Prepared by: Alpha & Beta FZE

VALORAN MEMBER

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Valoran Real Estate Brokers Issue No. 8 - August 2013

News Digest

Last month at a glance

Dubai: Property Prices and Rentals Increase Rapidly in Q2 Property prices and rentals in Dubai grew for the fourth consecutive quarter, with a strong increase being recorded in the second quarter of this year.

The steepest rise has been in the residential sector, with a recent Asteco property report pegging a 12 per cent increase in apartment sales over the previous quarter and a year on year growth of 38 per cent.

Increased sales have not been restricted to apartments alone. During the same period, villa sales increased by 8 per cent, while year on year growth was 24 per cent. Similarly, rentals for apartments and villas grew by 7 per cent and 6 per cent respectively in the second quarter – a growth of 20 per cent and 12 per cent over last year’s figures.

Downtown Dubai continued to be the costliest area for purchasing an apartment, but despite this, property sales in the area increased by 18 per cent over the second quarter. International City and Dubai Marina performed best for apartment rentals, recording increases in annual rental rates of 11 per cent and 8 per cent, respectively.

For villa sales, the best performing property was Jumeirah Village, with sale prices growing by 25 per cent. Other villa properties that performed well include Springs, which increased by 11 per cent, and Arabian Ranches, which recorded a growth of 10 per cent. Springs and Meadows led, in villa lease rentals, increasing by 35 per cent and 17 per cent over the last year.

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Dubai’s commercial property market also witnessed a steady increase in growth rate in Q2. Rental rates in Jumeirah Lake Towers (JLT) recorded a year on year increase of 110 per cent, while rentals in Dubai Investment Park and Business Bay increased by 50 per cent and 36 per cent over the same period. The second quarter, ending June 2013, also saw office sales prices grow in JLT by 17 per cent over the first quarter figures. Office sale prices in Dubai Silicon Oasis recorded an increase of 11 per cent over the same period.

The reasons for the sharp growth in the real estate sector are being attributed to increased market confidence and the easy availability of mortgage financing.

Over 10,000 Hotel Rooms Being Added in Dubai A report by STR Global – a hospitality sector research firm – has estimated that Dubai has approximately 10,391 hotel rooms in the pipeline.

This figure includes rooms that are already under construction or in the early stages of development, but does not take into account those in the preplanning stages.

Dubai’s new addition accounts only for approximately 10 per cent of the 120,795 rooms that are being added in the region, but the Emirate is way ahead of other areas in the region that have over 1,000 new hotel rooms, including Abu Dhabi, Jeddah, Riyadh, Amman and Cairo.

A recent Q2 2013 report, by Jones Lang LaSalle, highlighted that the 58,000 hotel room capacity in Dubai achieved 85 per cent occupancy over the period. Besides The Oberoi in Business Bay, which was completed in the second quarter, several other new hotels are expected to open doors by the end of 2013, including Anantara Royal Amwaj, Conrad Sheikh Zayed Road, Sofitel Palm Jumeirah, and Novotel Al Barsha.

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Valoran Real Estate Brokers Issue No. 8 - August 2013

Dubai Property Developers to Issue Bonds for Financing Projects

Tough Times for Qatar Property Firms

Until now, Dubai’s real estate developers have relied largely on banks for financing projects.

However, with the number of lenders in the region decreasing due to the partial pull out of European banks in the region, and with the UAE Central Bank set to draft new rules that will limit the exposure of banks to entities that are state-linked (the state has significant stakes in most of the large real estate firms), developers are looking at the bond market for raising additional funds.

Qatar’s real estate developers are facing difficult times, while the Gulf State is in the process of undertaking massive infrastructure development.

The announcement of financial support from the state in the amount of $7.1 billion to the Barwa Real Estate – the largest listed developer – and restructuring efforts by other leading developers such as United Development Co and Qatari Diar, which is state owned, are indications of the industry’s weakness.

Market trends indicate that there will be a huge investor demand for these bonds. The Gulf’s bond market has matured and offers more liquidity than it did during the Dubai’s previous real estate boom, in the middle of the last decade. Additionally, after the 50 per cent plunge during 2009-2010 financial crisis, property prices are on the rise once again.

As per recent estimates, residential property sale prices have recorded a year on year growth of 16 per cent. These factors make real estate bonds more attractive to foreign investors.

Qatar has been investing billions in developing its infrastructure with the goal of giving Dubai competition as the financial center of the region.

While there is no dearth of finds, since Qatar’s rich natural gas reserves makes it one of the wealthiest countries in the world, it remains to be seen whether the state can lure professionals to set up base – something at which Dubai has excelled.

View of Doha, Qatar

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Other headlines in brief •

Phase 1 of Dubai Properties Group’s Bay Square Project Sold Out: 450 commercial and residential units sold. Release of Phase 11 announced.

•

Rent Hike for Shared Accommodation in Dubai: Low income residents have been impacted by 10 per cent to 50 per cent increase in rentals for shared housing.

200 Property Firms to be Hosted at Cityscape Global 2013: The 12th edition of the largest international real estate event in the Middle East will be held from the 8th to the 10th of October, 2013.

•

•

Govt. Employees Return to Abu Dhabi before Housing Deadline: With the oneyear deadline nearing, state employees are moving back to Abu Dhabi to retain their eligibility for housing allowance.

•

Palm Jumeirah Residences Get the Attention of GCC Investors: Anantara Residences in Palm Jumeirah received increased interest for its phase one release.

•

Dubai’s Property Developers Optimistic about the Market: Fifteen new mixed-use towers will come up over the next four years in Dubai Maritime City.

New Dubai Real Estate Investor Protection Law to be released: ‘Tanweer’ or the Real Estate Investor Protection Law is ready and awaiting clearance from authorities before its release.

•

Abu Dhabi, United Arab Emirates

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Valoran Real Estate Brokers Issue No. 8 - August 2013

Latest from the economy

Prices Drop for Building Materials in Abu Dhabi in June According to data from the Statistics Centre Abu Dhabi (SCAD), the prices of several groups of building materials reduced, in comparison to the same period last year. The decline ranged between 0.3 per cent for waterproofing materials and 13.8 per cent for wires used in residential projects.

Analysts say that the reduced prices are caused by the increase in the value of the US Dollar, in relation to the currencies of emerging markets.

Most of the materials used for construction in the UAE are imported, and with the UAE Dirham being pegged to the US dollar, a strong performance by the dollar results in imported goods becoming cheaper in UAE Dirhams.

Dubai’s Stock Index Rallies Highest in Five Years Following a healthy performance of the economy in the second quarter, the Dubai Financial Market General Index recorded a gain of 1.83 per cent to reach 2541.52 – the highest gain since November 2008 (Source: Bloomberg). The 31 stocks traded on the DFM saw 21 surging, 9 decreasing and 1 remaining unchanged.

The Abu Dhabi Securities Exchange General Index, also increased for the 11th consecutive day, to record a gain of 0.92 per cent to close at 3857.52.

Analysts attribute the cause for the continued rally of stocks to the strong fundamentals, since important sectors such as trade, tourism and real estate are continuing to perform well – an indication that the economy is making a steady recovery. www.valoran.ae

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Luxury Goods Can Fetch Return on Investment Due to the huge demand from the world’s affluent, the worldwide luxury goods segment, which is worth over Dh961 billion (€200 billion), is expected to grow at almost double the rate of this year’s global GDP. While most wealthy people buy these brands more for the social prestige attached to them rather than as an investment and consider them depreciable assets, there are a few who believe that they can bring returns over a period of time.

Certain luxury items such as watches and jewelry appreciate in value, although they are used and sold second hand. Brand connoisseurs usually look at watch brands such as Patek Phillippe, Officine Panerai and Audemars Piguet as a long term investment. According to a source from Christie’s, last year, a Patek Phillippe platinum watch was sold for Dh13 million ($3.6 million). In the world of jewelry, in 2011, a Cartier necklace, which was once owned by Elizabeth Taylor, and valued between $200,000 and $300,000 (Dh0.73-1.1 million), fetched Dh13.5 million at a Christie’s auction.

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Automobiles and luxury accessories such as handbags also see significant value appreciation over the years. The Bentley’s R-type Continental Hatchback, which was a limited edition model with just 208 cars being manufactured between1952-55, was valued at over £500,000 at the end of 2012.

Similarly, accessories from leading fashion houses such as Chanel, Louis Vuitton, Gucci and Hermes, don’t depreciate in value, although they are used, largely due to the prices of these brands escalating every year. In 2011, a red crocodile leather Hermes Birkin bag sold for over $203,000 at an auction in Texas.

Not every expensive brand guarantees long term returns. Since the purchase of designer brands is largely driven by personal choice, there is no guarantee that they will fetch high returns, especially since the market is unpredictable as there is no clear cut valuation method or a governing body that oversees the trade and resale of these luxury goods.

Valoran Real Estate Brokers Issue No. 8 - August 2013

Most people who buy these brands do it not so much for investment as for showing the world that they have arrived. For safer and more reliable means of getting returns on investments, other platforms such as stocks, commodities, mutual funds and investments are a better option.

UAE: Low Arrival Rates Attributed to Ramadan not MERS Corona Virus

IMF Cautions Dubai about High Debt Structure The UAE economy is steadily recovering with the annual Article IV report of the International Monetary Fund (IMF) projecting a growth rate of 3.6 per cent this year (compared to 4.3 per cent last year). While increased tourist arrivals and a rapidly growing real estate sector have been giving the economy a boost, the IMF pointed out that Dubai needs to manage its currently high debt levels to avoid another boom and bust cycle.

The UAE witnessed a slowdown in travel demand in June-July. However, industry experts say that the subdued demand is not due to the fear of contracting MERS-CoV – a SARS like virus – that has claimed 45 lives worldwide, but rather due to the fasting period during Ramadan. While there has been a lower rate of arrivals of business and leisure travelers, with some hotels reporting a drop in occupancy rates by 30 per cent, this occurs every year during the summer months and Ramadan.

As the financial center of the UAE, Dubai is the hub of economic activity in the region. However, the Emirate and its Government related entities have been relying heavily on debt and have borrowed approximately Dhs521.7 billion ($142 billion) – a figure greater than the country’s GDP. The global financial crisis of 2009 severely affected the UAE economy, following which, some of Dubai’s largest companies were forced to renegotiate the terms of their debt.

In the past, epidemics have had a severe impact on tourism and economy of countries. In Asia, during the 2002 SARS outbreak, countries not only saw lower tourist demand, but also reduced foreign investment. While there is optimism about tourist demand recovering after the fasting period, if the virus continues to grow, it could severely impact travel during the Haj season in mid-October. Only a transparent approach towards assessing the country’s level of risk will ensure that the virus doesn’t reach epidemic proportions.

The real estate market in Dubai has picked up with several large new projects being launched.

Residential rents have also registered a year on year increase of 30% in June, as per the estimates of real estate services firm CBRE. However, the IMF warns that this renewed activity, which is spurred on by large scale external and domestic borrowing, could lead to another boom and bust cycle and advises that the government should raise the fees on real estate transactions if the prices continue to rise.

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Dubai Freehold Property Arabian Ranches, “Desert Paradise” Set in the midst of the desert on the Emirates Road, Arabian Ranches is a project by Emaar Properties, which lets home owners experience the charm of living in a desert paradise. Its location 9km from Intersection 4 on Sheikh Zayed Road near the Mall of The Emirates, provides excellent access to Abu Dhabi, Al Ain and Sharjah from the Emirates Road, and it’s only 15 minutes to Dubai Airport. For traveling within the city, the Dubai traffic can be avoided as almost any part of town can be easily accessed via Al Khail road, including Dubai mall, Jumeirah or across town to the Creek or Oud Metha on the Business Bay crossing. The Dubai Bypass Road is a short distance behind the Ranches and connects easily to RAK and Fujairah.

Community Centre The community center at Arabian Ranches has shopping, dining and entertainment with options for the whole community. There are 20 retail units, which include a le Marche (subsidiary of Geant), cafes such as Shakespeare and Co, Costa Coffee, Burger King and MBCo, besides a hair salon, nail spa, laundry, pharmacy, health clinic and travel agency. A beautiful mosque takes Centre stage in the retail center.

Equestrian Centre The Andalusian style Equestrian Centre at Arabian Ranches has activities for every skill level. The options include polo, riding lessons, show jumping or exploring the tranquil desert trails on horseback.

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The Polo Club has facilities such as lounges and dining areas, a store for riding gear and tack, spa, swimming pool and two polo fields. During the Polo season, many social events are organized, including picnics on the terrace while watching the fast-paced polo ponies and activities to keep

Arabian Ranches presents an exclusive lifestyle that showcases the mystique of the desert. With over 4,121 villas, built in unique styles and set in the beautifully landscaped surroundings, this is a desirable community with on-site facilities that take care of every need.

Valoran Real Estate Brokers Issue No. 8 - August 2013

the children amused. The luxurious Angsana Spa offers a range of services for a touch of pampering.

The Golf Course For those who enjoy a game of golf, Arabian Ranches has a desert-style grass golf course, which is designed by Ian Baker-Finch in association with Nicklaus Design. It’s the region’s premier desert style course, which makes the maximum use of the natural terrain and is filled with indigenous shrubs and bushes. It offers a challenge for golfers of all abilities, with immaculate grass on the fairways and greens that merge with the ‘sandy waste’, if a shot goes astray. Additional services and facilities at the golf course include the availability of GPS yardage service on every golf cart and lessons with one of the pros at the Golf Academy. The Spanish Colonial style clubhouse has the Ranches Restaurant and Bar, which presents panoramic views over the course from its terrace. The clubhouse also has 11 luxurious Guest Rooms within, which offer spectacular views of the Golf course.

Project Name

Style/Type

Education Located in Arabian Ranches is Dubai’s world class Jumeirah English Speaking School, which enjoys an excellent reputation. It offers primary and secondary education based on the best aspects of the National Curriculum of England and Wales and also includes the over 16-years course of study: the International Baccalaureate Diploma.

Arabian Ranches features several projects within the gated community.

Location

Units Type

Unit Size

Casa

Moroccan style single family villas

Between Palmera and La Coleccion communities

Two storey, 3-4 bedroom, single family villas

3,100-3,750 sq.ft.

Alma Townhomes

Spanish influenced single-family attached villas (town homes)

By the lake in the heart of the Arabian Ranches

Two storey, 3 bedrooms + 1 study

2,436-3,153 sq.ft.

Alvorada

Portuguese influenced single family villas

Between Palmera and La Coleccion communities

Two storey, 3-5 bedroom, single family villas

3,566-4,844 sq.ft.

Al Mahra

Single family detached homes

Between the Desert Course and Terra Nova

2 storey single family detached villas

3,470-6,866 sq.ft.

Al Reem

Attached villas

Eastern edge of Arabian Ranches

Two storey single family detached villas

1,690-3,060 sq.ft. (3, 4 and 5 Bedroom suites)

Hattan

Single family detached villas

Overlooking the Golf course

2 storey single family detached villas

La Avenida

17 exclusive villas in a mix of Spanish and Portuguese styles

Between the Arabian Ranches central lake and the Arabian Ranches Golf Course

2 storey 5 to 6 bedroom villas

5,443-7,230 sq.ft.

Mirador

Spanish styled single family villas

Between Desert Course and Gazelle

Two storey single family villas

3,458–6,911 sq.ft.

Mirador la Coleccion

Spanish styled villas

At the Desert Course

Two storey 5 to 7 bedroom villas

Palmera

Single family attached villas

Western edge of Arabian Ranches

2 storey single family cluster homes

1,889-2,936 sq.ft.

Saheel

Contemporary single-family detached villas

Opposite the Golf Course

One & two storey, 3 & 5 bedroom

3166-5308 sq.ft.

Savannah

Single family detached homes

Overlooking the Golf Course

Detached single family villas

3,216-6,185 sq.ft.

Terra Nova

Single family detached homes

Between Al Mahra and Mirador

2 storey, single-family detached villas

3,470 sqft-6,866 sq.ft. (4 to 7 bedroom units)

The Golf Homes

18 palatial villas with Hispanic architecture

The Desert Course

3 different styles – Hacienda (6,908 sq.ft.), Castilla (8,270 sq.ft.), Suncadia (8,924 sq.ft.)

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International Property Markets Hong Kong Commercial Sector As one of the world’s most expensive property markets, the popularity of Hong Kong’s real estate can be attributed to the strong investor demand.

Its strategic geographic location, status as an international financial center and the liberalized economy have kept prices so hot in recent times that the Government has resorted to several

control measures to cool it down. These steps have been introduced in stages starting from November 2010, when a Special Stamp Duty (SSD) was introduced, until the more recent doubling of the existing stamp duty rate on purchases by companies and foreign investors (including those from mainland China), which was announced in February 2013.

However, despite this, prices of residential and commercial properties have remained elevated due to the lack of supply. The Government is also working towards releasing more land for development, in a bid to boost supply and improve the affordability of homes, and recently sold five residential sites through a public tender, which fetched HKD 11.5 billion. Additionally, the announcement of extension of the pre-sale period from 20 months to 30 months for uncompleted private apartments is aimed at boosting saleable stocks and increasing supply. Around 67,000 primary units are expected to be ready over the next three to four years. Until then, the tight supply will continue and keep demand high and prices resilient.

Hong Kong

12

Jan-13

Jul-12

Jan-12

Jul-11

Jan-11

Jul-10

Jan-10

Jul-09

Jan-09

Jul-08

Jan-08

Jul-07

Jan-07

Jul-06

Jan-06

Jul-05

Jan-05

Jul-04

Jan-04

Jul-03

Jan-03

Jul-02

Jan-02

Jul-01

Jan-01

Jul-00

Jan-00

Jul-99

Jan-99

Jul-98

Jan-98

Jul-97

Jan-97

Jul-96

Jan-96

Jul-95

Jan-95

Jul-94

Jan-94

Index (Jan 2000 =100)

Valoran Real Estate Brokers Issue No. 8 - August 2013

HONG KONG LUXURY RESIDENTIAL PRICE TREND 300

250

200

150

100

50

0

Source: Colliers

Hong Kong

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Residential Market According to market data, there was a 12.5 per cent decline in monthly home sales during May 2013 compared to the previous month. This is a drop by 36.5 per cent in relation to the figures from last year, with only 3,740 transactions taking place during the month. The decline can be attributed to the Government’s restrictive policies such as the doubling of the existing stamp duty in Q1 of 2013.

While there was a quarter-on-quarter decline of 19 per cent in sales volume in the residential sector, the prices remained elevated. A noteworthy point is the significant difference between the price trends in the mass vs. luxury residential markets. In districts such as The Peak, Mid-levels and South Side, which are traditionally the most premium areas for residences, prices registered a decline of 1.5 per cent quarter-on-quarter in February 2013, whereas mass residential prices increased by 6 per cent over the same period. The reason for this could be the large difference in stamp duty between individual price brackets (4.5 per cent for residential units with prices lower than HKD 4 million, against a maximum of 8.5 per cent for higher priced units), which makes less expensive properties more appealing to investors.

Only a sufficient increase in residential supply can help in moderating price growth and stabilizing the housing market in the long term.

RESIDENTIAL PROPERTIES TRANSACTION TREND 20 No v 10 Implementation of Special Stamp Duty (SSD )

16,000

12,000

400

22 Feb 13 Doubling the existing rate of Stamp Duty

14 Sep 12 Further tightening of mortgage lending policy

14,000

350 300

10,000

250

8,000

200

6,000

150

4,000

100

2,000

50

Ju n-13

Apr-13

May-13

Mar-13

Ja n-13

Feb-13

Dec-12

Oct-12

Nov-12

Sep-12

Ju l-12

Aug-12

Ju n-12

Apr-12

May-12

Feb-12

Mar-12

Dec-11

Ja n-12

Oct-11

Nov-11

Sep-11

Ju l-11

Total No. of Transactions

Aug-11

Ju n-11

Apr-11

May-11

Mar-11

Dec-10

Oct-10

Nov-10

Sep-10

Ju l-10

Aug-10

Ju n-10

Apr-10

May-10

Mar-10

Ja n-10

Feb-10

Ja n-11

0

0

Feb-11

Total No. of Tr ansactions

450

27 Oct 12 Implementation of Buyer’ s Stamp Duty and extension of SSD

10 Jun 11 Lowering of LT V ratio

No. of Sub-A SP

Source: Land Registry and EPRC

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No. of Sub- ASP

18,000

Valoran Real Estate Brokers Issue No. 8 - August 2013

Existing stock of Grade-A office space in Hong Kong

16.5%

23.5% Central

4.8%

Sheung Wan

3.3%

11.4%

Kowloon East Wan Chai / Cause way Bay Island East

16.1%

10.7%

Twim Sha Tsui

13.7%

Mong Kok/ Yau Ma Tei Others

Source: Rating and Valuation Department / Knight Frank

Kowloon East CBD2 West Kowloon

*

ns

i 0m

-2

5-10 mins*

15

Central CBD

10-15 mins*

Island East

15-20 mins*

Wong Chuk Hang

* Travelling time by car Source: Knight Frank, Map data Š2013 Google, MapKing

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Office Market Due to the volatility of premium office rentals and the shortage in supply of office space, more occupiers are looking at investing in office properties in core as well as decentralized locations. While the office segment may not seem too attractive to investors who are looking for an alternative to the Hong Kong’s residential market, for long term investors the high quality office buildings have an immense potential for valueadded conversions or repositioning. With office rentals on the rise in traditional business districts on Hong Kong Island, investors will continue to focus on properties in these areas.

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payments, but with the new double stamp duty this trend will be on the decline.

With the supply of Grade A office space remaining tight, prices continue to be high despite around 57.5 per cent of existing Grade A offices being over 25 years old. The Government has already put plans in place, to develop new office clusters, which would deliver an additional 50 million sq.ft. of office space between 2013 and 2016.

Plans are also underway to increase the supply of commercial land, which will add 3.6 million sq.ft. office space by 2020.

The Kowloon area generated around 60 per cent of the total sales in Q1 of 2013, largely owing to local developers who disposed commercial non-core assets to maximize profits in view of the slowdown in the residential sector. Small-tomedium investors also look at purchasing office buildings outside the Central Business District, as the transactions involve smaller lump sum Hong Kong

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Retail Market With the introduction of stamp duty on sale and purchase of non-residential property, transaction costs increase considerably if the buyer makes a sub-sale before the delivery of the property. This measure along with the reduction in the LTV (loan to value) ratio is aimed at curbing speculative and investment demand from local investors.

Retail investment sales slowed down in the first quarter of 2013, recording a value of HKD 10 million – a decrease of 30% quarter on quarter.

With the shortage of options in the prime shopping districts, investors are now focusing on second and third tier streets in these areas or at investments in retail space located in non-core districts.

Property prices are growing faster than rents, which has led to compression of yields from retail investment. In traditional shopping districts the average yield of prime retail space is below 2% and is expected to rise only marginally in the short term as the demand for retail property investment decreases.

Forecast

Issue No. 8 - August 2013

The effects of the regulatory measures of the Government will be seen only in the long term.

Until supply increases adequately to meet the high demand in Hong Kong’s real estate market, prices will continue to remain elevated. In such a scenario, non-core sectors will benefit as investors move away from traditional core districts, especially in the office and retail sectors.

The residential market is likely to see stabilization in prices as the numerous measures such as the introduction of the Special Stamp Duty (SSD), lowering of loan-to-value (LTV), additional SSD and Buyers Stamp Duty (BSD) have resulted in a lower demand for residential investments. Until demand picks up again, buyers will opt for smaller properties to avoid higher transaction costs.

The rental market will fare well with prospective investors preferring to lease while they continue to watch from the side lines until the trend reverses, and residential investments become attractive once more.

Sources: Colliers Research & Forecast Reports, Jones Lang LaSalle Hong Kong Property Market Monitor – July 2013, Knight Frank Hong Kong Prime Office Market 2020 report

Source: Rating and Valuation Department

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Real Estate Investing Lesson 6

Finding the Right Property – Where, When and How to Decide Many people look at buying real estate as an investment, but gaining wealth from income properties involves a lot more than merely making a purchase. The old adage “Location, Location, Location” does hold true, but in addition, the value of the property has an important part to play in choosing one that brings returns.

It’s all about having a strategy in place, which includes researching the market, analyzing the demand-supply situation, understanding market dynamics such as real estate cycles and buying at the right time.

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Valoran Real Estate Brokers Issue No. 8 - August 2013

Luck or being at the right place at the right time has little to do with it. By following a systematic approach, almost anyone can make the right investment in property.

Where to Invest Location There’s no denying that the location of a property has a key role to play in making a wise investment.

Many investors think that this means only properties in prime locations. However, unless you know the real estate market really well, it’s advisable to stay close to home and look in your local community or city. The inherent advantage of this is that you will be able to monitor it easily without having to travel for hours, since you will have to oversee and manage your property in order for it to earn income.

Although this seems simple enough, not every property in your locale has the potential to earn income. You have to be clear about what to look for in a property before you invest. Of course, having a checklist and being patient helps, but it doesn’t mean that you have to wait until you find the perfect property that meets all the requirements.

Otherwise, you might end up not investing at all and missing out on the opportunity of earning income.

Evaluating a Property’s Earning Potential

either in terms of a higher NOI or a lower Cap Rate is a key step to adding wealth from real estate investment.

Calculating NOI (Net Operating Income) & CAP Rate Net Operating Income For finding the NOI of a property, estimate its Gross Operating Income and deduct operating expenses such as management expenses, insurance, janitorial services, maintenance, supplies, taxes, utilities, etc.

If a property has an earning potential of $50,000 annually from rental income, but its operating expenses are $30,000, then its NOI is $20,000. The NOI of a property increases either when it earns more or if expenses can be reduced.

Capitalization Rate In simple terms, Cap Rate helps to calculate how long it would take to start earning profit from your income property. It’s calculated by dividing the estimated annual Net Operating Income from the property by the total value of your investment.

If a property has an NOI of $50,000 and its investment cost is $500,000, then its cap rate is 0.1 or 10%, which means it would take 10 years to start earning profits from the investment. A lower cap rate indicates a shorter period for recovering your investment.

Investing in a property that has the potential to earn a higher return or reduce expenses is the ideal solution. Evaluate the property’s earnings prospects by calculating its NOI and Cap Rate.

There are certain telltale signs that you can read to assess whether rentals are too low to earn significant NOI. Properties with low turnover rates, long waiting lists or those that get snapped up when a rare vacancy arises are classic examples.

It’s simple economics. If demand exceeds supply, it’s more likely than not because of the low rentals.

Finding a property where value can be added

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When to Invest Location is not the sole determinant of whether an investment property will generate returns. While evaluating a neighborhood, it’s essential to analyze the state of the economy and the market trends in the region. With the use of the Internet, the process of gathering and analyzing economic data has become much easier than before. This data is also available from local and state government agencies and research libraries in universities.

The concept behind the right time to invest is based on the principle of buying low and selling high. Several economic and business conditions will impact the decision to buy or sell at a profit to maximize gains.

Growth in the Job Sector Job growth results in an increase in the demand for housing and commercial property in a region.

Keeping abreast of market news helps. For instance, the arrival of a large employer to the region will result in the creation of more jobs and drive up the demand for office space as well as residential property in the nearby community.

Population The demand for real estate is affected by population growth, as an increase in population fuels the need for additional housing and commercial space.

Therefore, analyzing population trends gives a realistic indication of whether or not demand in a region will increase in the future.

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Besides job growth, other economic factors, including wage levels, types of jobs and employment levels will play a part in determining whether it’s the right time to purchase an investment property.

Valoran Real Estate Brokers Issue No. 8 - August 2013

Local Supply and Demand Even if the economic conditions are favorable, keeping track of the local real estate market, including the demand and supply for residential and commercial properties will help in making the right investment decision. If supply of properties is disproportionately high in comparison to demand, it would result in lower rents and low occupancy rates.

Real Estate Cycles Market conditions will continue to affect the value of a property even after the purchase is complete.

In order to get the maximum returns from an investment property, an investor should be aware of the cyclical nature of the market, which alternates between favoring buyers and sellers.

Tracking real estate trends and keeping tabs on when to buy and sell will bring maximum profits.

In a buyers’ market, sellers are more flexible with prices and sale terms due to supply being high, while in a sellers’ market, the demand for properties

outweighs the supply. In such a scenario, sellers will receive multiple offers for their property and have the option of negotiating prices and terms to maximize gains.

How to Decide Before taking a final decision to purchase an investment property, prepare a list of factors that make the property and the neighborhood attractive to tenants. If you are single, proximity to a primary school may not seem like an important point to consider before buying a piece of real estate. However, this is an added convenience for tenants who are parents of young children.

To judge a property without bias, look at it from a tenant’s point of view. Think of the factors that you considered when you were looking for a place to rent. What were your major considerations? At the time of viewing an investment property, list down its features and prepare a property fact sheet. This can serve as an information sheet for potential tenants, when they come to inspect the property before renting it.

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Properties of the month Dubai Marina

Elite Residence

JBR

Bahar 6

RE

NT

NT

RE

Price (AED)

110,000

Price (AED)

100,000

Number of Bedroom(s)

2 ( 3 units )

Number of Bedroom(s)

1

View

Partial Sea & Marina

View

Marina

BUA (in Sq.ft.)

1,329.34

BUA (in Sq.ft.)

779.73

Reference Number

AP1005

Reference Number

AP852

Agent Name

Alex

Agent Name

Alex

Contact Number

055 5075020

Contact Number

055 5075020

Park Island, Blakely

Dubai Marina

Down Town

29 BLVD Tower 2

NT

RE

NT RE

Price (AED)

130,000

Price (AED)

90,000

Number of Bedroom(s)

1

Number of Bedroom(s)

1

View

JBR, Marina Canal & Community

View

Normal

BUA (in Sq.ft.)

1,051.95

BUA (in Sq.ft.)

786

Reference Number

AP1181

Reference Number

AP1155

Agent Name

Alex

Agent Name

Miad

Contact Number

055 5075020

Contact Number

055 2275515

22

Valoran Real Estate Brokers Issue No. 8 - August 2013

Down Town

Burj Views A

The Lakes

Hattan 2

L SA

E

E

L SA

Price (AED)

2,400,000

Price (AED)

14,000,000

Number of Bedroom(s)

2

Number of Bedroom(s)

6

View

Full Burj Khalifa

View

Lake & Park

BUA (in Sq.ft.)

1,249

BUA (in Sq.ft.)

8,124

Reference Number

AP1074

Reference Number

VI1088

Agent Name

Miad

Agent Name

Miad

Contact Number

055 2275515

Contact Number

055 2275515

Barsha

Barsha 2

The Views

Golf Tower 3

LE SA

LE SA

Price (AED)

13,000,000

Price (AED)

1,500,000

Number of Bedroom(s)

4

Number of Bedroom(s)

1

View

Road

View

Full Golf Course

BUA (in Sq.ft.)

7,500

BUA (in Sq.ft.)

990

Reference Number

VI1083

Reference Number

AP1176

Agent Name

Miad

Agent Name

Miad

Contact Number

055 2275515

Contact Number

055 2275515

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Properties of the month Down Town

Burj Views C

JLT

Saba Tower 3

L SA

E

E

L SA

Price (AED)

2,500,000

Price (AED)

1,050,000

Number of Bedroom(s)

2

Number of Bedroom(s)

1

View

Road

View

Sheikh Zayed Road

BUA (in Sq.ft.)

1,299

BUA (in Sq.ft.)

852

Reference Number

AP1133

Reference Number

AP1180

Agent Name

Miad

Agent Name

Miad

Contact Number

055 2275515

Contact Number

055 2275515

Silicon Gate 1 – Wing A

Dubai Silicon Oasis

Building 27 – Block A

Dubai Health Care City

LE

SA

LE

SA

Price (AED)

380,000

Price (AED)

11,839,750

Number of Bedroom(s)

Studio

Number of Bedroom(s)

Office – Clinic

View

Community

View

Community

BUA (in Sq.ft.)

441

BUA (in Sq.ft.)

3,640

Reference Number

AP1164

Reference Number

OF1165

Agent Name

Miad

Agent Name

Miad

Contact Number

055 2275515

Contact Number

055 2275515

24

Valoran Real Estate Brokers Issue No. 8 - August 2013

Down Town

Reehan 7

Jumeirah Islands Community

Jumeirah Islands

L SA

E

E

L SA

Price (AED)

6,000,000

Price (AED)

10,500,000

Number of Bedroom(s)

Penthouse – 3

Number of Bedroom(s)

Plot

View

Burj Khalifa

View

Normal

BUA (in Sq.ft.)

3,400

BUA (in Sq.ft.)

15,400

Reference Number

AP1141

Reference Number

RL1136

Agent Name

Mehdi

Agent Name

Mehdi

Contact Number

055 5075040

Contact Number

055 5075040

The Lofts, East Tower 4

Down Town

Business Tower

Business Bay

LE

SA

LE

SA

Price (AED)

1,500,000

Price (AED)

950,000

Number of Bedroom(s)

1

Number of Bedroom(s)

Commercial Space

View

Boulevard & Sea

View

Al Khail Road

BUA (in Sq.ft.)

400

BUA (in Sq.ft.)

1,214

Reference Number

AP187

Reference Number

OF1086

Agent Name

Mehdi

Agent Name

Mehdi

Contact Number

055 5075040

Contact Number

055 5075040

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Properties of the month The Address Dubai Mall Hotel

Down Town

The Palm Jumeirah

Balqis Residence

L SA

E

E

L SA

Price (AED)

3,100,000

Price (AED)

3,800,000

Number of Bedroom(s)

1

Number of Bedroom(s)

2

View

The Dubai Mall

View

Sea

BUA (in Sq.ft.)

780

BUA (in Sq.ft.)

2,022

Reference Number

AP1111

Reference Number

AP1120

Agent Name

Mehdi

Agent Name

Mehdi

Contact Number

055 5075040

Contact Number

055 5075040

Al Furjan

Qourtaj

Legacy

Jumeirah Park

LE

SA

LE

SA

Price (AED)

4,000,000

Price (AED)

7,000,000

Number of Bedroom(s)

3

Number of Bedroom(s)

4

View

Normal

View

Normal

BUA (in Sq.ft.)

6,000

BUA (in Sq.ft.)

4,335

Reference Number

VI1078

Reference Number

VI1146

Agent Name

Mehdi

Agent Name

Mehdi

Contact Number

055 5075040

Contact Number

055 5075040

26

Valoran Real Estate Brokers Issue No. 8 - August 2013

TWO TOWERS Building Features: • • • • • •

SPECIAL OFFER

Two residential towers with a shared courtyard Gymnasium & Swimming Pool with outdoor terrace area and landscaped sun deck Three level secure basement parking with single point access Vehicle drop off point at building entrance lobby Round the clock advanced security system Proximity to Metro Station and world class Shopping Malls

Apartment Features: • • • • • • • Unique and modern spacious 1B/R and 2B/R apartments available in Two Towers - Tecom, graced with contemporary European fittings, perfectly suited to accommodate premium lifestyle in Dubai.

Two Towers provide its residents easy access to business hubs such as Dubai Media City and Knowledge Village as well as areas such as Palm Jumeirah and Dubai Marina, Mall of the Emirates and Ibn Battuta mall. You’ll find you’re never too far from work, play, or rest and direct access to Al Khail Road and Sheikh Zayed Road make it easy to reach places farther afield.

Huge balconies offering panoramic views High ceilings Solid marble, Slate and Parquet Flooring Italian Wardrobes and Kitchen Cabinets German Quality White Goods Energy efficient Central water heating system – resulting in substantial savings in electricity bills Centralized Air Conditioning from on-site Chillers – again resulting in huge savings.

Prices start from AED 1,375,000 for 1 B/R and AED 1,800,000 for 2 B/R apartments with financing option for 10 years.

Community

Tecom -Barsha

Tecom - Barsha

Property Name

Two Towers

Two Towers

Price (AED)

1,375,000

1,800,000

Number of Bedroom(s)

1

2

BUA (in Sq.ft.)

1,318

1,745

Reference Number

AP1123

AP1124

Contact Number

04 33 22248

04 33 22248

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T W O

T O W E R S

O NE B EDRO O M F L O O R P L A N

LAUNDRY

LIVI NG/DI NING ROOM KITCH EN

EN TRANCE

GU EST BEDROOM

EN S. 1

2

TYPICAL FLOORS: 3RD TO 21ST

1

3

6

UNITS 3 & 6: 1 BEDROOM APARTMENT UNITS: 1, 2, 4 & 5: 2 BEDROOM APARTMENT 4

28

5

Valoran Real Estate Brokers Issue No. 8 - August 2013

T W O

T O W E R S

T WO BEDRO O M F L O O R P L A N

KITC H E N L IV ING/DI NING RO O M

E NT RANC E

GUE ST

LAUNDRY

BE DRO O M II

E NS. II

B EDRO O M

E NS. I

2

1

3

6

TYPICAL FLOORS: 3RD TO 21ST UNITS 3 & 6: 1 BEDROOM APARTMENT UNITS: 1, 2, 4 & 5: 2 BEDROOM APARTMENT 4

5

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FAC T S SH E E T O N E - B E D R O O M

A N D

T W O - B E D R O O M

BEDROOM L AY O U T

FLOORING

Spacious room with balcony Open outside view Floor to ceiling windows Sliding door “tilt and slide”, Italian mechanism Semi-Solid Oak Parket

SANITARY

Duravit - UK design and manufacturing

MIXERS

Grohe - German design and Manufaturing

FLOORING

Beautiful Marble

Floor to ceiling windows.

Sliding door “tilt and slide”, Italian mechanism FLOORING

Semi-Solid Oak Parket

LIGHTING

European design

B U I L D I N G

CABINETS

Functional furnished. Italian design and manufacturing

E L E CT RI CA L TEKA, German design A PP L I A NCE S German and Spain manufacturing Includes: washing machine and dryer machine, column installation

Wall design marble mosaic

KITCHEN

Spacious room with balcony Perfect distributionof areas Dining and living areas close to window

LAUNDRY

A CC E S S ORIE S Assorted mirrors, stainless steel functional, design accesories

European design

LIVING ROOM/ DINING ROOM L AY O U T:

D E T A I L S

BATHROOMS AND GUEST TOILETS

W A R D R O B E S Italian design and manufacturing LIGHTING

A P A R T M E N T

BALCONY

FLOORING

Black Slate / Mosaic slate

CABINETS

Fully furnished. Italian design and manufacturing

FLOORING

Porcelain tiles

E L E C T R IC A L TEKA, German design A P P L IA NCE S German and Spain manufacturing Includes: electrical oven, hood, touch electrical hoob, waste dispenser, dishwasher*, Mitsubishi fridge and freezer

D E T A I L S

AMENITIES

LIFT LOBBIES

Building controlled entrance

FLOORING

Fitness center

Black slate / Marble

Spa Swimmingpool Shopping center and restaurants in the Podium DU provider

AIR CONDITIONING SYSTEM CHILLERS Carrier - Europe design and manufacturing

ELECTRICAL Switches and sockets ABB - UK manufaturing

FAN COIL UNITS (FCU) Carrier - Europe design and manufacturing

FRESH AIR HANDLING UNITS Carrier - Europe design and manufacturing

GARAGE

LIFTS

Each apartment has covered parking space in the basement

Mitsubishi, highspeed

STO R AG E

6 lifts: 3 units per tower, dedicated to tenants

Available in the basement area for tenants*

2 lifts dedicated to podium

* Some exceptions

30

The above mentioned speci cations could be modi ed due to technical reasons without prior notice

Valoran Real Estate Brokers Issue No. 8 - August 2013

• • • • •

Ready, spacious and elegant 1 & 2 bedroom apartment Low down-payment Competitive interest rate of 3.85% Guaranteed rental income 10 years financing with no documentation

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