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Dubai is definitely hot property in 2006!
A warm climate all-year-round, beautiful sandy beaches, a luxurious standard of living, low house prices and practically every leisure facility you could possibly imagine – welcome to Dubai...
And, if all that’s not enough, it is also a tax free environment. But with 85,000 properties currently under development, where should you buy, what returns can you expect and what are the pitfalls to watch out for?
Dubai was once a small trading post on the Persian Gulf, but when forecasts predicted that oil reserves were running out Dubai’s royal family set their sights on creating the most formidable business and tourism hub in the Middle East.
Their vision and ambition has resulted in a population which is increasing faster than any other country and an economy that is growing at twice the rate of China’s. This growth has helped create a property boom where demand outweighs supply and rental yields and property prices are soaring, achieving returns which are hard to attain elsewhere.
Last year Dubai witnessed an 18% growth in its property prices, while rental yields reached 15%. With the number of visitors estimated to increase from 5 million to 15 million by 2010, the investment opportunity that a second home in Dubai brings should not be ignored.
Much of what is driving this growth, bringing jobs to the region and attracting tourists, is the amazing attractions on offer. No expense is being spared to ensure that state-of-the-art facilities are created.
Dubailand, for example, is bigger than Disney Land with six themed worlds and over 200 individual entertainment projects, while Hydropolis will become the World’s first underwater hotel. Then there’s the Wild Wadi Water World, a themed water park which has received an award for its Outstanding Accomplishment for its Design and Theming. And perhaps one of the strangest attractions, given Dubai’s desert location, is the indoor skiing facilities. The Ski Dubai, Mall of the Emirates is the world’s third largest indoor ski slope, measuring 400 metres and using 6,000 tonnes of snow, while the Dubai Sunny Mountain Ski dome provides a great family attraction, featuring a revolving ski slop, an artificial mountain range, an ice bridge, a cable lift, a snow maze, an ice slide and special sound and light effects. Sport is also a big feature in Dubai, with events such as the Dubai Tennis Open and the Dubai Desert Classic attracting leading competitors in the world of tennis and golf. Dubai was recently given the accolade of the world’s leading golf destination by the International Golf Tour Operators Association (IGTOA). For horse lovers there are treks to join and horseracing to enjoy, with race meetings held in the cooler months of November to April, with the Dubai World Cup being the pinnacle of the calendar. For the more adventurous there is sand surfing, camel riding and the full range of watersports you would expect with crystal blue waters.
When buying property abroad, a good location is essential if you are to achieve the best possible rental yield or resale value. Currently the most sought after locations in Dubai include the Palm Islands and Dubai’s Marina.
The Palm islands are a collection of three man-made palm-shaped islands where it is rumoured a number of high profile celebrities have purchased property. But with one bedroom apartments starting at approximately £230,000 and waterfront villas costing around £2.5million, property in islands surpasses most people’s budget. Dubai’s Marina, on the other hand, is more affordable while still offering all the luxury of this 5-star state. Home to one of the world’s premier mooring sites, the marina’s promenade boasts designer shops and the finest restaurants, offering a sophisticated social scene to visitors and residents. Dubai Select currently has two developments in the Marina. The Torch is an iconic 74-storey development consisting of 1, 2 and 3 bedroom apartments, and duplex penthouses. Designed by award-winning architects to compliment its fantastic location, residents are offered stunning views across the length of the marina out to the Arabian Gulf. These spectacular views are maximised with floor to ceiling windows and exceptional balcony space. In addition to elegant bathrooms and kitchens, there are up-to-the-minute internet and telecommunications systems, car parking and recreational amenities, including: temperature controlled swimming pool, sauna, steam room and spa, a gymnasium, as well as shopping and dining facilities. One-bedroom apartments are currently available for £129,679.
The Point Dubai Marina is Dubai Select’s latest development which is now being sold off-plan. Only launched on 14th May 2006, it occupies a prestigious promenade position at the widest point of the Marina opposite the grand Dubai Yacht Club. In addition to 1, 2 and 3 bed apartments, plus penthouses, it also offers studio apartments, giving purchasers the opportunity to have a slice of paradise from as little as £75,000.
Of course there are many other developments underway, both in the marina and in other areas of Dubai and we would always recommend that purchasers shop around and do their research on the developer, the development and the surrounding areas before making a decision. It’s vital to trust the company you decide to buy from, especially with the development being so far away. Don’t be afraid to ask for references from existing customers.
Prospective purchasers should also be aware that some companies who appear to be the developer might actually be an agent, which means that once you sign for the property – and the agent gets its commission - your details are passed onto to someone new. While this can work, it does mean that you don’t have the benefit of dealing with the same single point of contact throughout the whole process, something which at Dubai Select we feel it is of great importance. It means we develop a relationship with our customers and get a real understanding of what they are looking for out of a property.
To date it has not been possible for a foreign national to own the freehold on a property in Dubai. This situation is now changing as a statement in March announced the finalisation of the land registry legislation.With this hurdle removed, the only real obstacle to investing in Dubai is getting the cash to invest. Securing a mortgage on a property in Dubai is possible but it requires some understanding of what the various lenders expect from applicants and an appreciation that you will have to jump through a few more ‘hoops’ than if you were applying for a mortgage in the UK. While it is practically unheard of to be approved by a UK-based lender for an off-plan property in Dubai, some global lenders, such as HSBC, as well as local lenders in the UAE, are able and willing to offer finance for property bought off-plan in Dubai. We always recommend that purchasers seek local expert opinion when applying for a mortgage.
The other factor is that Dubai’s developers require payment by completion to fund the construction of their development. Your upfront costs will be around 20-30% of the purchase price, with monthly instalments throughout the term and a final payment upon completion. It is worth looking around for different finance options however as some developers have created their own schemes which are more flexible. Dubai Select, for example, offers a payment plan which lets investors pay in quarterly instalments.
With its warm climate, leading edge attractions and promise of strong financial returns, Dubai is a great second home destination. But the message is clear – the best returns are going to be to those who get in early. Once mortgages are more widely available and the ability to purchase property becomes more accessible, it is anticipated that prices will escalate.
For more information, contact Dubai Select on 0870 111 0000 or visit www.dubaiselect.com
A host of airlines fly to Dubai, including Emirates: www.emirates.com/uk For Dubai Tourism visit www.dubaitourism.ae or call 0207 839 0580
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