I have a question regarding investment in a studio and one-bedroom apartment in International City in Dubai. The idea seems attractive mainly because of the low price point and high return on investment. Do you think these properties are worth an investment? Although I don't see much prospects of capital appreciation, the units can be useful to get rental income. EA, Dubai
Investing in property with a view to gaining income is extremely lucrative in Dubai as some projects see double-digit return on investments (RoI). International City is definitely one of those projects. The second income of real state is capital appreciation, this is when the value of the property increases over time. This then gives you a lump sum when you go on to sell it as well as the annual income from renting.
Capital appreciation only occurs in a rising market and this form of investment is unlikely to yield a profit any time soon. That said, I would like to point out a few factors that may influence you and try to give you an answer to your question.
Prior to the pandemic spreading and the stay-at-home restrictions during March/April, real estate in Dubai was starting to see some green shoots of price appreciation within certain projects.
2020 was going to be the year that potentially saw an uplift in property prices after five to six years of downward pressure. Expo 2020 Dubai at the end of October virtually guaranteed a sentiment of positivity, along with the interest it was to generate worldwide.
Now that it has been postponed to next year, the positivity that was slowly coming back in the housing market has given way to uncertainty because of the pandemic.
We are slowly getting back to some form of normality but in terms of capital appreciation, specifically for International City, I feel this may take a short while longer, perhaps into 2021. Everything we were looking forward to in 2020 has now been deferred to next year, so the time to buy in order to judge a return to positive property prices could be later on in 2020 or early 2021.
The area of International City, especially near Dragon Mart, is undergoing redevelopment and as such, transport infrastructure will also help elevate property prices in the future with the addition of a Metro line.
This, together with further extensions to Dragon Mart, will add to the attraction of the area and, in time, further its capital appreciation. Buying now or in the very near future could mean that potentially you would have bought at the lowest point. So, you should see a return not only in the rental RoI, but also in terms of capital appreciation in the medium term.
Mario Volpi is the sales and leasing manager at Engel & Volkers. He has worked in the property sector for more than 35 years in London and Dubai.
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