Homefront: ‘Will buying properties in new projects offer better rental yields?’

Spending on upgrades and maintenance in old buildings will hit your potential return on investment

Apartments in Dubai offer approximately 6 to 8 per cent gross return on investment, while villas and townhouses achieve slightly less gross RoI of about 4 to 6 per cent. Photo: Antonie Robertson / The National
Apartments in Dubai offer approximately 6 to 8 per cent gross return on investment, while villas and townhouses achieve slightly less gross RoI of about 4 to 6 per cent. Photo: Antonie Robertson / The National

I am an experienced investor in the Dubai property market and already have a few investment properties in a master developer’s established communities in the city. These units offer me good rental yields. However, I am now keen to pick up more investment properties in new projects.

Although the old communities fetch attractive rental returns, the buildings have begun to age and I fear I will have to spend more money on maintenance. Would you advise me to buy investment properties in new projects?

How does a building’s age impact the service charges an owner needs to spend? Also, I am keen to buy a villa for investment. What kind of rental yields can I expect on this purchase? PM, Dubai

Diversification in any property portfolio is key to success. Buying units in only one area can be okay but all your investments will either go up or down at the same time, depending on the market.

Having different asset classes or varied units in multiple locations could cushion you from the all-or-nothing result.

I would recommend you to mix up your investments and therefore suggest that you look at units in new projects as well. Look for good payment plans but the most important point to watch out for is who the developer is.

The law has changed dramatically since the heady days of real estate prior to the 2008 peak, so any developer today has to abide by stringent rules and laws that were not in place in the past. That said, I still suggest that you must research the developer to ensure your investment is delivered on time and will continue to give you the required returns long into the future.

All buildings will need more investment in the long run as facilities will need to be upgraded or replaced over time. This will obviously hit your potential return on investment (ROI) as more money spent on upgrades and maintenance will affect your bottom line. This statement is true for all asset classes but especially for apartments within towers.

Buying units in only one area can be okay but all your investments will either go up or down at the same time, depending on the market

Mario Volpi

If you wish to invest in a villa, this will initially offer you less ROI but healthier capital appreciation as the current market is driving this sector better than apartments.

Generally speaking, apartments offer approximately 6 to 8 per cent gross ROI but this depends on a few factors such as the exact location, size, view and facilities. Villas and townhouses are achieving slightly less initial gross ROI of about 4 to 6 per cent, but you are more likely to gain on capital appreciation at the moment.

Investing in property is the best investment you can make, assuming you hold the investment for a while. The key to success is knowing when to buy and when to sell. This is the million-dollar question!

I have a bizarre problem. I stay on the ground floor of a building and my apartment faces the main door. My building watchman now sits on a chair right outside my apartment rather than at his designated desk.

I presume he sits there because he can access free WiFi from an adjacent apartment on the ground floor. He can also see the building entrance from this point and check on visitors entering and exiting the building.

Although I know he is not permitted to sit there, I haven’t complained so far. However, he has begun to create a ruckus because visitors and technicians such as electricians and plumbers come to him and they have lengthy, loud conversations outside my door.

This has begun to affect the quiet enjoyment of my property. Am I allowed to register a complaint because I feel this is unprofessional behaviour? MM, Dubai

Any tenant is entitled to quiet enjoyment of the rental property they live in. If this is disrupted, you have recourse to rectify this.

In your situation, I would not initially register a complaint with a higher authority such as the security guard’s bosses, but instead have a word directly with the person in question explaining that their actions are now affecting you.

After this, if the problem doesn’t stop, then of course you have every right to lodge a complaint through the proper channels. I’m sure the problem will stop after this.

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. The opinions expressed do not constitute legal advice and are provided for information only. Please send any questions to mario.volpi@engelvoelkers.com

Published: May 27, 2021 07:30 AM

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