The wisdom of investing in a home unit

DUBAI, UAE - June 4, 2014 - PRLog -- One of the most important concerns of people everywhere is finding the right property to live in, whether alone or with one’s family. Deciding on where to live is no easy decision. Even someone who has enough funds to put down a deposit for a mortgage still has to determine the best way forward. Trying to figure out where you want to live, how much you have to spend, and what you will get for your money are crucial to making the correct decision, whether it is an Apartment or a villa you are looking for.
That is why it is very important for buyers looking for a property to get in touch with agents who are aware of what is happening in the market, and can advise them accordingly on the best course of action. There are many reliable sources of information such as Reidin, the Dubai Land Department (DLD)and real estate research firms which issue 6 quarterly and yearly reports on the market for the public to peruse.
According to reports, the highest sale price increases in Q1 of 2014 happened in Downtown Dubai, Dubai Marina and Jumeirah Lakes Towers, with year-on-year movements of 61% to 63%, respectively for apartments. In terms of villas, Al Furjan, Palm Jumeirah and Jumeirah Village had yearon- year increases of 57%, 58% and 63%, respectively.
This means buyers have to pay much more compared to the start of last year, with the difference between villas and apartments being only a small margin.
On the rental side of the market, JLT and Dubai Marina had increases of 62% and 49% year-on-year, with a surprisingly smaller increase in Downtown Dubai of 27% compared to the two other areas. The same was witnessed in this quarter in the villa market with prices only increasing on average between 20% and 30% year-on-year.
Taking the above into account, we can quickly spot two patterns in the market. Firstly, sale price increases were a lot higher than the rentals. Secondly, this means investors looking to rent out their properties are gaining less rental returns compared to what they would get if they bought last year. So if you’re buying to invest in a rental property, you won’t get the same return on the rent but you will likely get a higher capital appreciation which, in turn, aids in your investment. Also, investors who bought property last year made big gains in capital appreciation especially before the Dubai Land Department regulations changed, and this has helped stabilize the market somewhat.
Taking a closer look at one Dubai prime area like Dubai Marina which had an increase of 63% year-on year in sales, and a 49% increase in rentals, we can see that the market has moved a long way since last year.
With current prices at an average of Dh2,000 per sq.ft., and taking into account an average one bedroom being around 950 sq.ft., it now would cost, for an average apartment, Dh1,900,000. The other option, of course, is to rent an apartment, with prices for rentals on average Dh120 per sq.ft., then it is possible to rent at Dh115,000 for a one-bedroom, and lower for something smaller.
The above example is also representative across Dubai Real Estate (http://www.astonpearlre.com/), with a similar pattern among villas and apartments. In the current market, it would be advisable to buy in the viewpoint that rental prices have still yet to increase to match the increased sale prices; therefore, tenants in the near future may have to pay a lot more than they have planned. If the same people chose to buy instead of rent, then they have the security of ensuring they pay a certain amount and at the end of the mortgage, they already have a secure investment.