I moved to Bahrain six months ago and am thinking of buying a property in the UAE for investment purposes that generates a decent yield with good capital appreciation. I was reading about Abu Dhabi, especially when it comes to rents which, I believe, are higher than Dubai. What are the best places in Dubai or Abu Dhabi that fit my criteria? I want to invest about Dh600,000 to Dh800,000 into a studio and/or a one-bedroom. I will also need mortgage financing, so do you recommend certain mortgage companies? What is the average yield I will receive (net of taxes, maintenance) and is it better to go with big names? Finally, given that prices have been softening over the past 18 months, when should I buy? MM, Bahrain
Investing in property can be a lucrative venture but you are right to do your homework because if the timing is out, you can sometimes be left out of pocket when determining when to sell. Here are some options to consider:
In my opinion, the current best places for ready properties to buy would be International Media Production Zone (IMPZ), Sports City and Jumeirah Village Circle (JVC).
In these areas you will be able to buy a studio or one bedroom apartment. The average sale price per square foot (combined average) for apartments is Dh886 for IMPZ, Dh905 for Sports city and Dh923 for JVC.
For Off plan, the Nshama Town Square development, especially the Zahra Breeze apartments, offer great value for money. One bedrooms range from Dh575,000-Dh670,000 and two-bedrooms range from Dh800,000-Dh900,000. There is a 50/50 payment plan or alternatively finance is available through Noor Bank at the time of booking which will allow 50 per cent to be paid over 10 years post completion.
The other option for off plan would be to look at Glamz residence by Danube which is located in Al Furjan close to the new proposed metro line connecting Dubai with the Expo 2020 site. These fully furnished studio apartments start at approximately Dh470,000 with an affordable payment plan as follows: 10 per cent on booking (deposit), 15 per cent after two months then 1 per cent per month for 75 months. Completion is set for 30 months time which would mean you will be paying 53 per cent between booking and completion with the remaining 47 per cent payable in 47 monthly instalments following possession.
• Abu Dhabi
In the capital, value stability combined with continued rental growth has seen net yields improve in the investment areas of the city over the last six months particularly in developments where service charges have declined. For example, within Gate Towers in Al Reem service charges have dropped by Dh4-5 per square foot.
Oil-price crunch or not, nothing can deter Abu Dhabi’s property market ascent, with apartment rental yields as high up as 9.2 per cent.
No doubt the constrained supply and increasing demand for housing has had a positive effect on these prices. Average apartment sale prices have posted an encouraging 5.3 per cent month on month increase in February this year along with overall yields averaging 6.75 per cent.
Abu Dhabi studio apartments stood out in terms of both the growth, as well as the yield. And yields for one and two-bed apartment categories were recorded at 7.7 per cent and 6.9 per cent respectively; sale prices for the two categories returned increases of 1.9 per cent and 2.8 per cent.
The top areas in terms of apartment sales are; Al Reem island, Al Muneera at Al Raha Beach, where one beds have an average yield of 7.6 per cent, and Al Zeina where one beds have an average yield of 7.5 per cent.
• The paperwork
When purchasing a secondary market ready property, use one of the many mortgage brokerage firms rather than necessarily going direct to a bank. The main advantage is that a broker has industry knowledge and is aware of all the differing rates and which bank is lending on which project. Broker firms also have “buying power”, ensuring you get the best possible rates and terms and conditions.
The average rental yields vary widely as the cost of the property and service charges to maintain it must be compared with the overall rental income. Generally, the areas mentioned in Dubai attract yields of between 7-8 per cent and up to 8-9 per cent in Abu Dhabi.
When buying off plan, concentrate on developers with a good track record of delivery; their reputation on build quality is also key. Investing in lesser known developers is up to you as new laws now in place are designed to protect buyers.
Lastly, the right time to buy, in my opinion, is always now, as property that is held long term will always give a good return. Having said that, prices will start to firm up towards the latter half of this year so perhaps wait until after Ramadan before proceeding with a purchase.
Mario Volpi is a real estate professional who has worked within the industry for the past 31 years in London and Dubai. The opinions expressed in this article are those of the author and they do not reflect in any way those of the institutions to which he is affiliated. It does not constitute legal advice and is provided for information only. Please send any questions to email@example.com.