Why choose a villa over an apartment

Dubai is one of the few cities in the world where the population is made up with over 80% being expats. With such a high transient population many choose to rent for the first few years to ensure Dubai is right for them and their families before making the big financial commitment of buying.

With this in mind the demand for good quality villas is exceptionally high which in turn attracts investors. But why buy a villa over an apartment? There are several reasons why a villa makes more sense and gives you a better net return.

First we look at the profile of expats in Dubai. You have your young bachelor’s who are in Dubai mot only to make money but to make the most of the lifestyle and they look at apartments in the Marina and Palm Jumeirah areas. However there is also a large number of expats who are in their mid 30’s and upwards who are with their families. They are normally the higher earners in Dubai. They are here to earn good money but also to give their families the best start in life thanks to Dubai being one of the world’s safest cities, enjoying the perfect climate for an active and outdoors lifestyle and of course a great selection of the best internationally recognized  schools.

So why a villa over an apartment?

There are several reasons and not all are based on financial returns.

First the purchase price is more reasonable than apartments in the Marina and Palm. For example you can purchase a 3 bedroom villa in the sought after Springs community for AED 1,600,000 where as a three bedroom apartment in the Marina would be nearer AED 1,900,000. You then need to look at the service charge. For apartments the average charge is AED 18 per sqft where as villas are much lower at an average of AED 2 per sqft. Working this out on an average property of 2,000 sqft gives you a saving AED 32,000 per year. And finally the rental income for the villa you are looking at AED 160,000 and the apartment AED 170,000 so when taking the service charge into account the net return is higher for the villa at just under 10% net return against 7% for the apartment

So the figures make sense but what about your tenant. Most landlords feel more comfortable knowing they have a family with children living in their property as opposed to a young bachelor  who might be enjoying the lifestyle of Dubai a bit too much and neglecting  the property. As we all know a well presented property not only rents out quicker but also achieves a higher price. As an overseas landlord it is much better to know your property is being looked after and will be handed back to you in great condition when your tenant vacates.

What about future appreciation?

This is very difficult to predict. There are currently two major factors that drive the Dubai property market, supply and demand and finance. Supply and demand is the big one in Dubai especially with a further 55,000 properties to be handed over by 2015. This is of course a worry but only a small number of those are going to be villas with the vast majority to be apartments. So considering the supply and demand this is not a concern for the villa sector and should not affect prices in a negative way, in fact quiet the reverse could be seen as the population increase we could see a shortage which will drive prices up.

The second factor is the mortgage markets and the availability of borrowing. Over the course of 2011 we have seen a gradual shift from all the major banks to the extent where now they are competing with each other and driving down the rates thus making borrowing affordable. When the banks lend in Dubai they take into account who the developer is, this has a big impact on the loan to value “LTV” and the repayment % rate. With over 80% of villas built by the 3 master developers, Emaar, Nakheel and Dubai Properties you are guaranteed the best packages the banks are offering.

So after considering all the factors

·         Higher net rental returns

·         High end tenants

·         Potential future under supply in the market

·         More favorable mortgage packages

Yes villas are a sound investment in Dubai

Justin Stevenson

Sales and Leasing director elysian real estate

How your property investment in UAE benefits you

There are three investment options for investors to add a good value to their money. First one is to invest in real estate property UAE. Once you invest in the property of UAE, your investment would appreciate with time and you would also get monthly income. Second option with investors to make a huge return on your investment is to purchase shares of a company.
If the company is able to perform well, then your share would be valued and in this case you would be given dividend. If the company is not able to perform well, you are not provided with dividends and your shares are depreciated in this case. Going for shares of any company is a risky act. The best way is to invest in property of United Arab Emirates because this will provide you many ways to make a high return on your investment.
Here are some ways which would help you to increase your income and value of investment: Give your property on rent If you rent your property, then you would be able to earn a steady income in the form or the rental payments. The return is on monthly basis so it is said that there is no risk associated with the property investment. Although the process of the properties come down in some past years but still the rent graph was slopping as usual.
On the side of shares, if the company is able to make a huge profit, you would be paid your dividend. If this is not the case, then you are not paid your dividend as well. Your property is appreciated Even after a small period of time, your property is appreciated and a value is added to it. The property investors in UAE are having even double appreciation some times.
To increase the value of your shares, you have to make efforts every hour but still there isn’t any surety that your shares would be appreciated. Value is increased on the sale of your property Although liquidation is not taken as a good transaction in any business but in case of property investment, most of the investors are seem to be waiting to raise the price s of the property. After improving the appearance and functionality of the property, investors usually sell out at a very high price.
Property can help you to make more investments If your background is clear and favorable then you can also make loans on your property. The amount from these loans can again give you a high return if you invest them again in the property. Can buy property at very low prices some time Some times many investors are able to buy the property on vary low prices.
Some times if a business got bankrupt or need finance to sustain the business, they sell their properties with in a short period of time at low prices. Although the above ways would help you in making a high return but still you need to know how to make smart decisions. You need to understand time value of money and its relation with the income flows and the value added to the property. So if you are able to make some better decisions regarding when to buy a property, when to rent it and when to sell it, you would obviously benefit from your property in UAE. Best of luck for you investment and hope you would perform well in the property market of UAE.