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Buy-to-live or rent in Dubai?
by This email address is being protected from spam bots, you need Javascript enabled to view it on Tuesday, 25 September 2007
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Results 1 to 7 of 7
Posted on Tuesday, 2 October 2007
why invest it in UAE?
Posted by OMB at 08:00 UAE time
To re-invest the rental income in a fixed deposit renewed annually at 4.8% ? Why not reinvest outside the UAE? A fixed deposit of 8+% in India? Changes the equation considerably.
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Posted on Monday, 1 October 2007
Buy - to live or rent
Posted by Raj at 17:00 UAE time
I agree, You cant keep tab on costs - EMaar introduced Chilled Water fees of 7 AED per sqft. Come on .........
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Posted on Thursday, 27 September 2007
Buy to live or rent in Dubai?
Posted by Rodger at 16:00 UAE time
Using the author's logic (which may or may not be appropriate depending on your circumstances) you would actually live in the apartment yourself only if you were currently paying rent in excess of AED 90,000. The AED 12,000 service charges are irrelevant as you pay them anyway whether you live in the apartment or rent it out.
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Posted on Wednesday, 26 September 2007
cautions
Posted by Aust at 18:00 UAE time
Excellent article but it only seems to worry about interest rate changes. There are other things that may change. Maintenance charges can be hiked and a property tax could be introduced. Either of these could push the equation down to the break-even level so people need to be aware that there is no long term guarantee of profit in property. The nominal rate of return in all things in life reflects the risk of losing your money. High rates of return always equate to high risks.
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Buy - to live or rent
Posted by Harsh at 10:00 UAE time
Excellent analysis and very convincing. Now I wish you had written this 1 year back and then even I would have made money!!! Somehow a large portion of people have realised and made decent money in the property market in Dubai. Thanks once again.
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Buy-to-live or rent in Dubai
Posted by Shameem at 08:00 UAE time
Fantastic topic to share with the public who are not aware of market situations. Thanks for the topic and hope we will get more.
Thanks to Mr. Hani.
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Posted on Tuesday, 25 September 2007
Just comparing Dubai real estate buying with Toronto
Posted by Amit Kalia at 02:00 UAE time
The Toronto real estate market works almost in a similar way, but there are some fundamental differences. The markets here are more mature, grow at a slower pace (5-6% per annum over the last 9 years) and are not as speculative as Dubai. The users (people who buy to live in the properties) are in much greater numbers than the investors. The amorization is usually 25 years. Housing is the basic need. There is better job security and a balanced life style. Real estate investment other than one's principal residence allows one to deduct rental expenses (mortgage interest, taxes, maintenance costs, management fees etc.) from ones rental income. Thus making it an incentive to get rich by investing in real estate. At the same time, 50% of amount of capital gains is taxed (with an exception of principal residence). The interest rates in Toronto are in the range of 5.5% to 6% range compared with 8-9% in Dubai, at the time of this article. A one bedroom 600 sq ft condo in Dubai costs almost 1 million AED (approx. $274K CAD or USD, both Canadian and US currencies are at parity now). It cost almost same in Downtown Toronto (Wow! Toronto seems so affordable) and $210K in Mississauga, even more affordable. Assuming one buys in cash, the rental return is 7.8% in Dubai ( yearly rent less maintenance fee/ value of property percentage) compared to 5% and 4% in Mississauga and Toronto respectively (yearly rent - maintenance fee- property tax / property value percentage). Sounds good? Wait until you read below... This difference is primarily as result of no property tax in Dubai at this moment. But this higher percentage rental returns diminishes as soon as one takes into account the higher mortgage interest rate in Dubai. As per the article, the above property generates a negative cash flow (assuming 20% down payment, loan amortized for 10 years, 8.5% interest rate, 7% rental rate increase every 3 years) of almost AED 42,000 pa in Dubai or say C$14,000 per year. An ROI of 7.8 % and internal rate of return (IRR) of 13.8%. In Canada similar property will generate a negative cash flow of C$12000 or little less than Dubai. This is based on assumption of lower interest rate of almost 5.6% pa, 10 year term, 1% annual property tax, 2% annual rental rate increase (is based on inflation or CPI). An ROI of 17% or IRR of 11.5% . Not bad at all. In a nutshell, the property investment return in any market depends on factors like interest rates, maintenance costs, rentals, vacancy rates, rent increases, real estate buying/selling costs, supply, demand, job market, affordability index etc. The affordability index is the money one pays in monthly housing costs (mortgage, utility bills etc as a percentage of one's monthly income). This index again depends on loan amortization and interest rates. Currently the affordabily index to own an apartment in Toronto is 30.9%, which is not bad. What will this be in Dubai? Anything above 60% is a shaky market, in my opinion. The market fundamentals that support above affordability index should survive real estate prices and investment. When it doesn't, the market will show some sort of correction. The above ideas are solely mine and not of my organisation or local real estate boards in Toronto and Mississauga. Regards, Amit Kalia, Broker, REALTOR Royal LePage Real Estate Services http://www.realestate-ontario.com
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