Common Dubai investment errors

As we see the Dubai property market gaining more & more popularity from property investors, we are also seeing a common errors occurring by some investors, these common mistakes end up being costly for investors if they do not take adequate care. These have been listed below:

• Bad planning
• Cheapest is not always best
• Going direct to the developers

These three common mistakes have been explained in more detail below -

Bad Planning

As with all property investment in all locations investors need to have an overall plan or idea as to what they aim to achieve from their investment, i.e. long term investment, short term, or simply buying as a holiday home. This affects the type of property which is best for the investors and their needs. For example a pure investor looking for along term investment we would recommend purchasing commercial office properties such as the Regal Tower.
If an investor does not have a clear idea of what they aim to achieve from their, then the investment process becomes much more complicated especially when it comes to setting budgets and looking at types of property available, and in some case can lead to investors becoming slightly overwhelmed by the numbers and varieties of properties available.

Cheapest is not always best

Another common error seen is that certain buyers will look to go for the cheapest property they find within a particular location. This is not really the best form of investment, as buyers should be aware that very cheap properties are cheap for a reason primarily the issue is quality, in order to get properties which are much cheaper than others in the market and still obtain good profits some developers may look to compromise on build quality or the quality of facilities available i.e. Gyms, health clubs etc (Although exceptions do exist)
The better option is to pick medium priced properties for example a studio in Jumeirah Village South should be around £60,000.

Going direct to the developers

When buying property certain investors look at buying direct from the developers in the belief that that is how they will get the best deal, this isn’t necessarily true, the better way to invest and buy property is through a good quality overseas estate agent. These firms have made it there business to have a good sock of properties to suit all investment needs, and because they deal with a number of developers rather than just one, they are independent and in the best position to give property buyers that most honest advice and guidance about a particular property or location.

The are the three common errors made buy investors who look to buy in Dubai, and these three issues must be looked at in detail before looking to buy not only in Dubai but anywhere in the world, the simple solution is for buyers to do there research before they look to invest rather than while they look to invest.

Written by

Hamid Shah, Director of Mirage Real Estate Ltd a UK based firm specialising in Dubai and Arabian Gulf investment properties.

Tourism a blessing for the Dubai buy to let investor

For the past few years Dubai has proven itself to be the darling of the property investment world both within the Middle East and beyond, it continues to offer high rental yields and a very good capital growth rate of near 10% which we see today.

Yet Dubai's development has not just been restricted to the real estate sector, the tourism sector has grown by leaps and bounds in the past 3 years alone. With tourists staying in Dubai hotels numbering 5.4 million in 2004, whilst in 2006 tourist staying in Dubai hotels grew significantly to 6.5 million people. With the number of hotel rooms and flats numbering 40,862 in 2006 and the government of Dubai aiming to reach a target of 8-10 million tourists by 2010 shows that there is at present a significant gap between growing demand and availability of supply for tourist accommodation which may be increasingly felt as major future attractions such as Dubai land and Dubai Sports City open for business.

This level of growth in the tourism industry in Dubai has led to a very high occupancy rate for hotel rooms and apartments for example the occupancy rate stood at 85% in January 2007 alone. This has presented Dubai and UAE property investors as a whole with a splendid potential to capitalise on this growing market, the traditional method of property investment in such as buy to lets in Dubai may offer investors around 8% rental yield per annum. Yet short term letting tenants are charged hotel rates per night which depending on location and quality of properties, landlords can stand to make 10-15% rental yield per annum at today's hotel rates.

This is a situation which is not solely confined to Dubai, it is also very much applicable in other Emirates such as Ras Al Khaimah especially in established resorts such as Al Hamra Village , where hotel accommodation does not suffice to meet demand.

A common question asked by many investors is what is the best way take advantage of accommodation supply gap in Dubai?

There are two main routes which buyers can take with regards to this:

• The 1st method is to purchase an apartment or villas and utilise a high quality property management company which will take care of an investors property. Normally the management charge will be 20-25% of an apartments rent per annum. It may also be necessary to buy a furniture package from property management company which may vary in cost between £2-£5K.

• The second option available to investors is to purchase a hotel apartment in one of the key future tourist locations such as Sports City in Dubai, such as The Cube. These developments are often managed by 5* hotel companies which will in many some occasions give investors rental guarantees and 30 days complimentary stay within the hotel. These are developments in a majority of cases will be fully managed, maintained and furnished with no additional cost to yourself.

Those property investors looking for long term investments who do not intend to move into their properties should consider the hotel apartments as their ideal investment solution. It is a type of property which does not require any significant effort on behalf of investors in terms of finding a capable property management firm to maximise property rental turnover, which saves both time and money. Short term holiday letting is the ideal form of buy to let for the savvy Dubai investor, with rumours of rental stabilisation in the traditional buy to let market, holiday home letting presents one the best potentials for sustained high rental yields.

By

Hamid Shah
Director of Mirage Real Estate Ltd