Generous deals are enticing buyers into the UAE’s property market, but will the move translate into an attractive property investment? With residential prices now approaching the bottom of the current cycle, there are many great deals on offer in the market for an attractive property investment.
5 Reasons Why The UAE Is An Attractive Property Investment
- Affordable Housing
The UAE is paying renewed attention to ensuring supply in the affordable housing sector. The availability of options in this market sector is attracting both investors and end users. This shift towards the middle-income or affordable sector over the past few years marks a positive development in the maturing of the UAE property sector.
- Off-Plan Deals
The past few quarters have seen the off-plan market surpassing the secondary market sales by 30 percent, an interesting vote of confidence by both local and international investors.
- Attractive Returns
The UAE’s property market offers attractive rental returns compared to other locations in the world. Even in a softening market, investors can achieve gross yields of between six percent and 10 percent.
- New REIT choices
Several new Real Estate Investment Trusts (REITs) launched onto the market recently stimulating significant new activity in the REIT market, with new products being launched or planned in Dubai and Abu Dhabi
- Community Choices
Buyers in the UAE now have a wider range of property options. In recent years, several new projects have been launched in emerging as well as more established communities with the governments of the different emirates also announcing significant budget allocations for infrastructure support.
Developers Flag Deals To Drive Investment
Real estate developers are promoting a range of attractive property investment offers across the UAE, all designed to encourage investment and inject continued interest in UAE’s property sector. Developers are now noticeably taking a more aggressive and imaginative approach to clinching an attractive property investment deal and ensuring presales remain healthy amid rising competition from competing markets.
While credit rating agency Standard & Poor’s predicted house prices and rents in the UAE would fall because of the continued fallout from low oil prices and currency woes, many developers irate see seasonal offers as an opportunity for new impetus in the sector.
Many developers promoting property offers believe the UAE market is one for buyers looking to own property. The low prices, attractive payment plans, and discounts indicate the time is ripe to take advantage of this timing. Over the past year, the real estate market has stabilised in terms of pricing and the attractiveness of offers has continued to increase, particularly in Dubai. The continued presence of offers in the market ensures the market remains healthy and competitive.
Some developers are offering to swap buyers to purchase across some of the most affluent areas. Incentives can include Dubai Land Department fees being paid and extended payment periods, which contribute positively towards a healthy marketplace.
Some back-ended payment plans have been offered for mid-tier projects that will deliver by 2019 or 2020. High-net-worth individuals are choosing to invest in these projects as it gives them flexibility and spreads the risk on their portfolios.
Changing market conditions means developers must have affordable options to enable mid-income buyers to access the market. In the past, market conditions made renting the only possibility but today, due to affordable options and payments plans, buyers can finally get on the UAE property ladder.
Besides affordable housing, it has been interesting to see developers challenge each other by offering aggressive payment plans in the market.
This is in comparison to the past where the developer offered a standard payment plan which was 70/30, meaning 70 percent money paid during construction in staggered payments, and 30 percent paid on handover.
Today, developers are offering different payment schemes such as 20 percent on booking and 80 percent on handover. Developers are also regulated by entities such as the Dubai Land Department today and payment plans are now approved by the Dubai Land Department prior to launch, further adding to buyer security.
The strength of the dollar has also impacted the buying power of the UAE property sector’s traditional audience, with Britons, Indians, and Pakistanis all witnessing their currencies decline in value over the last year.
However, the overarching picture remains positive. Despite a year-on-year contraction in the total number of real estate investors in the UAE last year, the country continues to be the most mature real estate investment destination in the region with attractive property investment offers, and with a diverse pool of investors sourced from more than 136 countries.
The UAE’s real estate sector has enjoyed a strong position despite a market slowdown. Secondly, Dubai’s status as a top commercial and tourism hub is continuing to grow in strength. As the market continues to mature, there is a strong appeal amongst international investors and the government is spending millions on funding of major infrastructure projects in time for Expo 2020.
Recent data from the Dubai Land Department shows that GCC investors represent the largest Dubai property investor segment in 2015, spending AED 44 billion. The majority of this spending comprised Emiratis, who spent AED 26 billion, followed by Saudi nationals, who spent AED 10 billion last year.
With Expo 2020 just around the corner, Dubai will be welcoming 25 million additional visitors for the six-month mega event. As the preparations for Expo 2020 continues to accelerate, a significant rise in demand for residential and commercial Dubai property investment is anticipated by investors worldwide, in addition to a significant rise in the number of jobs.
The continued strong appeal of UAE property investment is evidenced by the fact that over 150 nationalities invested in Dubai property alone last year. Furthermore, investors can expect rental yields at an average of 7 percent, which remains very attractive compared with cities such as Hong Kong, which offer yields at around 2 to 3 percent.