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 lucrative, but if the timing is out, you can sometimes be left out of pocket when determining when to sell. Here are some options to consider:
The 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. One bedrooms range from Dh575,000 to Dh670,000 and two bedrooms from Dh800,000 to Dh900,000. There is a 50/50 payment plan or finance is available through Noor Bank, which allows 50 per cent to be paid over 10 years post-completion.
The other off-plan option would be Glamz Residence by Danube, located in Al Furjan. These fully furnished studio apartments start at about Dh470,000 with a 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 paying 53 per cent between booking and completion, with the remaining 47 per cent payable in 47 monthly instalments.
In the capital, value stability combined with rental growth has resulted in net yields improving over the past six months, particularly in developments where service charges have declined. For example, within Gate Towers in Al Reem service charges have dropped by Dh4 to Dh5 per square foot.
Abu Dhabi apartment rental yields are up to 9.2 per cent.
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 and 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.
When purchasing a secondary market-ready property, use a mortgage brokerage. 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 terms and conditions.
The average rental yields vary as the cost of the property and service charges have to be compared with rental income. The areas mentioned in Dubai attract yields of 7 to 8 per cent and 8 to 9 per cent in Abu Dhabi.
When buying off-plan, concentrate on developers with a good track record of delivery.
Lastly, the right time to buy is always now, as property that is held long term will always give a good return. But prices will start to firm up towards the latter half of this year, so perhaps wait until after Ramadan before proceeding.
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.
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