If you're looking to invest in the UAE's property market, then what can Dh1 million buy you in the current climate?
Softening sales prices over the past few years, developers building smaller unit sizes and the lower deposit now required to secure a mortgage makes buying a home to live in, or as an investment, more affordable, say industry analysts.
Transactional data suggests that demand for Dh1m properties is on the rise. Almost half of all completed residential transactions in Dubai in the first half of this year were below the Dh1m mark, according to real estate consultancy Core.
With current property values more than 30 per cent cheaper than 2014 peak values, demand has picked up in recent weeks as the economy opens up, says Edward Macura, a partner at Core.
“Sale prices have been under pressure over the last few years primarily due to oversupply concerns. We have seen a similar trend continue in 2020 due to the lingering impact of oversupply while demand drivers have also been impacted in the interim. Average residential capital values from January 2020 to July 2020 have dropped over 4 per cent,” says Mr Macura. "However, we see sale prices remaining under downward pressure as supply and demand continue to adjust to market conditions."
Mortgage consultancies are also reporting a steady stream of customer enquiries in the Dh1m price range. According to Mortgage Finder, 33 per cent of its mortgage requests in 2018 were for properties priced at Dh1m and below, this fell to 29 per cent in 2019 and was at 27 per cent in the first half of 2020.
“It is no secret that a few banks have altered their lending policies during the pandemic, becoming slightly more restrictive in terms of the industries they are willing to lend to. However, for the most part, banks in the UAE have remained open and ready to accept new business, with some even introducing excellent new rates and products to tempt potential buyers into the market,” says Brendan Kennelly, senior mortgage consultant at Mortgage Finder.
The Central Bank of the UAE's easing of loan-to-value ratios by 5 per cent in March now means the deposit required to buy a new home decreased to 20 per cent from 25 per cent for first-time expatriate buyers, and to 15 per cent from 20 per cent for Emiratis. A first-time expatriate buyer, for example, only needs a Dh200,000 deposit to purchase a Dh1m home.
Real estate sales are expected to pick up in the second half of the year in Abu Dhabi on the back of government initiatives and incentive packages offered by developers, according to real estate consultancy Chestertons.
While sales prices are expected to drop during that period, "generous developer incentives, such as extended post-handover payment plans, initial service charge waivers and discounted prices should serve to support transaction volumes”, says Chris Hobden, head of strategic consultancy, Chestertons Mena.
The National has rounded up five properties currently on the market for about Dh1m in Dubai and Abu Dhabi.
One-bed serviced apartment in Paramount Tower, Business Bay, Dubai
Listed price: Dh1m
Built-up area: 87 sq m (940 sq ft)
Developer: Damac Properties
What you get for your money: This completed, fully furnished apartment can be bought directly from the developer. It offers one bedroom, two bathrooms (one en suite) and the white goods are included. The property has views of Downtown Dubai, a yield of about 7 per cent to 8 per cent and an underground parking space. There is a post-handover payment plan available from the developer.
What to watch out for: Service charge of Dh17,860 for a year
What the agent says: "Amenities include a lobby, restaurants and lounges, retail outlets, wellness and fitness centre, steam room and sauna, kids studio club, spa, meetings and events facilities, a Paramount Pictures screening room, swimming pool and two gyms," says Raghad Tikrity, luxury sales specialist at Luxhabitat Sotheby's International Realty.
“The buyer has the option to give it to a holiday home company called Stay Cay. They can rent it on a short-term basis and manage it on behalf of the owner."
One-bed apartment in Marina Heights, Dubai Marina
Listed price: Dh735,000
Built-up area: 63.5 sq m
Developer: Rafi M Saeed Group. Completed in 2006, Marina Heights is 55 storeys high and includes 380 apartments.
What you get for your money: The property, located on a higher floor, offers a balcony with a partial sea view, a parking space and access to a pool and gym. It is located near to Dubai Marina Walk and is six minutes from the nearest Metro station. The unit, which is rented out until May 2021, can earn a rental income of Dh60,000, according to Espace Real Estate.
What to watch out for: There is an annual service charge of Dh11,000, including chiller charges.
What the agent says: "This is a great entry level investment property with immediate income in the heart of Dubai Marina. Currently, it is the best priced one-bedroom apartment available in the Marina Heights tower," says Sohail Kanji, senior client manager, Espace Real Estate.
"The seller is a UK national who owned the property for six-and-a-half years. They wish to sell this property to reinvest in the UK as exchange rates are currently favourable."
Two-bed apartment in Sun Tower, Al Reem Island, Abu Dhabi
Listed price: Dh1.1m
Built-up area: 116.5 sq m
Developer: Aldar Properties. The building was handed over in 2011.
What you get for your money: Located on a high floor with views of the sea and mangroves, this property comes with three bathrooms, allocated covered parking and superior finishing.
What to watch out for: There is a service charge of Dh20,000 a year.
What the agent says: "The seller is a French national. This is a hot deal because it offers the lowest price in the market. This apartment has a high build quality and also offers good prospects for capital appreciation," says Mostafa Kassab, senior sales and leasing agent at Crompton Partners Estate Agents.
One-bed apartment in Cayan Tower, Dubai Marina
Listed price: Dh1.2 million
Built-up area: 66 sq m
Developer: Cayan Group. The Cayan Tower is seven years old. The architects behind the project were Skidmore, Owings & Merrill.
What you get for your money: Located on the 38th floor with partial views of Dubai Marina and Palm Jumeirah, the apartment comes with white goods, a parking space, 24-hour security and concierge services. The building offers a kids' nursery, play area, gym and an infinity pool. Rental yields are expected at between 5.5 per cent and 6 per cent.
What to watch out for: The annual service charge is Dh8,805.
What the agent says: "The residential unit belongs to an Italian investor who would have used it sparingly for his travels and short-term rentals. However, in the current market, the owner does not feel it is a viable option. He has owned it since 2013," says Honey Deylami, an associate at Luxhabitat Sotheby's International Realty.
One-bed apartment in Al Nada 2, Al Muneera, Al Raha Beach, Abu Dhabi
Listed price: Dh1m
Built-up area: 84 sq m
Developer: Aldar Properties. The building is eight years old.
What you get for your money: Located on the 14th floor, the apartment offers a full sea view, a large balcony, two bathrooms and allocated basement parking. White goods are included and the property comes with a gift card worth Dh500 from the agent, use of six gyms, six pools and a residents-only beach in Al Muneera.
What to watch out for: The service charge is Dh11,000 per year.
What the agent says: "The owner is an American and is leaving the UAE. He held the property for eight years. It is a well-maintained, owner-occupied apartment," says Angela Marie Roys, senior sales and leasing agent at Crompton Partners Estate Agents.
“Everyone waits for a unit on the top floor of Al Nada 2 to be vacant because these hardly ever come up for sale. This is a great investment opportunity and can provide good returns, with a gross yield of 7.2 per cent post Covid-19."