Property in Dubai (2)
Zhanna wrote that one cannot lose if one buys property directly from the developers, in what is called 'off-plan.' One purchases desert, and, when the property is finished, the price has invariably doubled. At least in the past. As I wrote previously, prognostication can be much more difficult if applied to the future.
The basics of Western property investment are that prices are determined by rents. If it is more cost effective to rent, people will rent, driving rental prices up and purchase prices down; if it is more cost effective to buy, people will buy, driving purchase prices up and rental prices down. In a 'normal' market, investors pay 20%-25% down, and rents cover 100% of expenses the first year. The spouse of the property investor will invariably complain that a great expenditure of money produced no income.
Eventually, however, the mortgage is paid off, the investor has only the maintenance expenses on the property, and the investor has either a good source of income, or a property that can be sold for a good profit. If rents rise with inflation, and the investor has a fixed mortgage, the investment proves profitable long before the property has been paid off.
If prices are rising rapidly, investors might pay more than the rent can cover. This is invariably a bubble. At some point, investors find that no one is foolish enough to pay them far more than they paid, and prices collapse.
The Dubai market is complicated by attitudes toward financing in the Middle East, by the uncertainty about what, exactly, ownership entails, and by rent controls.
Without financing, only those who can pay 100% can purchase property, which is a tiny percentage of the population. Financing has been growing rapidly in Dubai, and today 95% financing is available for salaried employees. Of course, Dubai now has many self-employed workers who are not eligible for financing.
In addition, the original contracts proving ownership of property in Dubai were all in English, a language which has no legal status in Dubai. Today, registration (in Arabic) of properties is possible. However, what this registration means is not altogether clear to anyone who does not read Arabic. (And, I've been told and take on pure faith, what registration means is not altogether clear even if one does read Arabic.)
Finally, rent controls allow an almost guaranteed 7% increase in rents each year, which should provide a reasonable profit potential. But there is clamouring for total control on rents, with no increases at all allowed. If this happens, the value of Dubai properties should fall sharply.
The basics of Western property investment are that prices are determined by rents. If it is more cost effective to rent, people will rent, driving rental prices up and purchase prices down; if it is more cost effective to buy, people will buy, driving purchase prices up and rental prices down. In a 'normal' market, investors pay 20%-25% down, and rents cover 100% of expenses the first year. The spouse of the property investor will invariably complain that a great expenditure of money produced no income.
Eventually, however, the mortgage is paid off, the investor has only the maintenance expenses on the property, and the investor has either a good source of income, or a property that can be sold for a good profit. If rents rise with inflation, and the investor has a fixed mortgage, the investment proves profitable long before the property has been paid off.
If prices are rising rapidly, investors might pay more than the rent can cover. This is invariably a bubble. At some point, investors find that no one is foolish enough to pay them far more than they paid, and prices collapse.
The Dubai market is complicated by attitudes toward financing in the Middle East, by the uncertainty about what, exactly, ownership entails, and by rent controls.
Without financing, only those who can pay 100% can purchase property, which is a tiny percentage of the population. Financing has been growing rapidly in Dubai, and today 95% financing is available for salaried employees. Of course, Dubai now has many self-employed workers who are not eligible for financing.
In addition, the original contracts proving ownership of property in Dubai were all in English, a language which has no legal status in Dubai. Today, registration (in Arabic) of properties is possible. However, what this registration means is not altogether clear to anyone who does not read Arabic. (And, I've been told and take on pure faith, what registration means is not altogether clear even if one does read Arabic.)
Finally, rent controls allow an almost guaranteed 7% increase in rents each year, which should provide a reasonable profit potential. But there is clamouring for total control on rents, with no increases at all allowed. If this happens, the value of Dubai properties should fall sharply.
posted by Dubai@Random at 12:29 am
4 Comments:
Zhanna is a new version of SPAM and has also just left a comment on one of my posts from last year about the marina. All the links in his/her comments lead to http://www.dubai.org.uk/
Keefie from Adventures in Dubai has just posted on the UAE Community Blog about getting spam comments from Dubai Property.
Investing in properties is a brilliant way to secure your future. It helps you to return double or triple the amount you invest on. But the success is in finding the right property at right place. And it cannot be found just by seeing through the 'Property for sale' boards in sideways. It will need more research and resource.
As indicated by the most recent report of the Dubai House Price Index from Colliers International, land costs in Dubai have developed very nearly seven percent amid the second from last quarter of 2009. Land exchanges expanded by 64 percent amid the second from last quarter generally because of relative soundness in costs and moderate lodging. It is normal that the proceeding with property blast will be further reinforced by a progression of new dispatches and openings inside of Dubai. damac akoya
Purchase to let property Investors can expect two distinct sorts of return when arranging venture property; salary and/or development. On the off chance that contributing for development or capital increases, financial specialists by and large take a more drawn out term see instead of requiring more prompt access to capital. real estate mortgage dubai
Post a Comment
<< Home