Specifically what will
happen to Dubai’s property prices the coming month, quarter and year?
A question we come across
so frequently those days.
We read daily reports with
projections ranging from the market softening to the market dropping. We see
formulas and ratios linking the market sometimes to some of the fundamentals
and others to some technical indicators, or market moving elements from the price
of commodities to the mess taking place in some part of the middle east. We
lived the same market dynamic several times in the past and we will live the
same media dilemma several times in the future. Regularly we try through our
news section to shed light on the property related news to give our investors
and followers the ability to grasp an idea about the property market and market
movers. Our web editing team couldn’t find one piece of news in the past few
days that could be classified as reasonable. All news published and shared is
either giving negative projections and relating it to hundreds of reasons to
prove it, or claiming against such projections and using the same or other
hundreds of facts to prove the same.
Here I share my over view
which I hope would be as objective as possible and as realistic as possible. I
will review with you some of what I published in the last 16 months when all
the market was bullish and give my opinion about what’s coming. However what I
will not be able to do is answer the question above; and here is why.
I published on the 11th of
January 2014 the following.
“Exactly the time. Looking
at a city with endless possibilities, asked another time, which is the best
property to purchase? Another time I ask. What is the purpose of the purchase?
Same answer faces me. A fast flip.
Gents once again. There is
no property investment suitable for a fast flip, you can call that a property
gamble. You don’t need someone knowledgeable in Real estate to advise you on
that, you would need a fortune teller. Your 5 years old son can give you as
good an advise on this as anyone who is experienced and knowledgeable. If you
wish to purchase property to profit short term do your purchase with the
ability to hold it long term. Look at fundamentals when doing your choice.
Property is an asset. All assets are value driven although moved by waves of
sentiment. The key is to invest where this is VALUE. Never over invest, balance
your portfolio frequently, be consistent with your choices, don’t move with
bust and boom.”
On 17th of January 2014 I
published.
Be cautious! Over
investing is a very wide spread phenomena especially in upbeat times. Over
investing in any market and any asset class will lead you to a long term
guaranteed disaster. And this is one of the rare things you can guarantee while
investing. Investors In stock markets start over leveraging and go for junk
stocks mostly where prices are less stable, and fluctuation parameters are
bigger as they are moved by vibe rather value and fundamentals. In Property
investors will drift away from income generating properties and tend to reach
out for under construction property where price volatility is more probable or
over leveraging as the banks aren’t any wiser and start throwing funds encouraging
investors to over invest or shall I say -gamblers to over gamble-. Past times
proved that no one knows a peak otherwise past crashes wouldn’t have been that
detrimental. No one knows the peak nor the bottom. Value investing will keep
you on the right track, while adrenaline enthusiasts can -play around- with a
small portion of their portfolios (not to exceed 15%) by investing into more
volatile, none income generating assets to increase the possibility of having
high rates of return, while not risking going under if times changed.
Calculated risks gives you the ability to decide which risks can you afford or
not.
On 23rd of February 2014 I
published.
Again a run towards off
plan property..
Not bad except that some
of us or most of us are doing it for the wrong reasons.
Although purchasing
property off plan has several advantages, fundamentals should still be
considered while such a step is taken. Property unlike futures, stocks,
derivatives, bonds and gold of other commodities, is bought to be lived in not
traded.
Things to consider while
thinking of an off plan purchase:
1. History of the
developer. Consistency of deliveries from quality and time frames promised.
2. How is the project
financed? Is there a secured financier behind the project?
3. What you have in hand
is a contract until a property is built. Better make sure the contract is good
enough. Your rights, penalties on failure to deliver the promised quality or at
the promised time, what’s part of the common areas.
4. Compare prices with
built property in a similar area. Off plan projects regularly are a 3 to 5 year
plan. The price difference should be considerable from similar built property.
5. Look at the details of
the property you are purchasing. (layouts and key plans, material used,
positioning in the building, neighboring plots and future plans, window
positioning and light, proximity, traffic planning, family size planning). All
those are items you would have considered or built your decision on if looking
at a built property, why not consider when purchasing off plan.
6. Projected running costs
post completion.
Last but not least, HOW
ARE YOU GOING TO PAY FOR IT. If you’re buying property off plan to spread your
cash to the max even beyond what any financial institution would lend you then
you are planning for your big crash, or at best gambling and going all in even
without looking at your cards.
Be cautious. invest
healthy, homes are meant to help us get happiness and stability not grieve and
sorrow.
And again on the 5th of
August 2014 I published.
A sigh… preparing for the
coming growth trend.
A question which seems to
be disturbing most home buyers/owners/sellers those days, where is the market
going; have the market grown beyond it’s real potential.
Let’s look at few points
to evaluate the situation.
How does the price of land
compare to price of land in similar metropolitan cities internationally.
What is the price of
property relative to cost.
How big is real estate as
a portion of GDP.
What are the other sectors
of GDP and how are they doing. (evaluating fundamentals)
Future prospects.
After evaluating all those
points let’s ask ourselves the most important question why are you buying or
own a property. The right reason is as important as the right timing.
Here we are today
13/12/2014 looking at a softening market, thinking among ourselves have the
market lost pace- Have the market boomed and is ready for a crash- Have the
market grown beyond it’s real potential.
We also use reports and
predictions to confuse ourselves further. Some talking about the benefits of
EXPO2020, others talk about the oil price drop, few of us ever get regional
security and the international political game into the discussion. Some talk
purely about technical indicators and fundamentals. And finally the few who go
deeper into the crowd’s emotional intelligence and talk about sentiment and the
drive towards important episodes. We see parameters or when will the market
change up and down, we sometimes even hear specifics about the 63.5 days or the
4 months and a quarter it may take for the market to change direction again.
Gents all those reports
and arguments are so interesting to read and analyze. However let’s go back to
basics. I said it in great times, I said it in bad times, and I will say it in
all times, it is the same. I will not say something new.
Please answer those
questions for me and you will get the answer you are aiming for.
1.Why are you purchasing
property?
Is it to be an overnight
millionaire. If so, I hope you make much money, please stop reading what I
publish and continue reading the reports, any of the reports. Actually you can
even stop reading the reports and flip a coin. Head towards volatile markets,
hit and hope that you can run..
Is your purchase to create
consistent stream of incomes and make some money over a descent period of time;
or to live in it and hopefully make some money over the long run on top of the
rent save. You are on the right track. The question paused above won’t matter
to you. We all know that no one could predict the peak (except by mistake) or
the bottom (also by mistake) thus the additional few pips you will save waiting
for a market to soften further or lose if the market went up in the overall
scheme of things is meaningless. Let’s spread the 8% you would save if you were
so lucky and while waiting the market dropped by that much, over 10 years- or
even seven years. See how meaningless it is.
If you are buying the
right property today at a descent price, researching properly, negotiating
properly, and sleeping over it to take the right choice you will score right
every time or let me say most of the times to stay within the parameters of
gravity.
2.How are you paying for
it. are you over investing- regardless of your aim of the purchase, it is
advisable to always by with the ability to hold long term even if your aim is
to profit short term.
For some property is only
a shelter, and a source of pride.
For others property is
only an asset, and a source of profit.
It doesn’t matter how you
view property it always provides you with the following:
Hedge against inflation,
currency risks.
Income producing, while
the probability of growing in value.
Enjoy your investment and
make sure you don’t follow the advice of whoever is guiding you by the attached
graph.
Specifically what will
happen to Dubai’s property prices the coming month, quarter and year?
by Makram H. Hani
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&McGregor International Realty. All Rights Reserved.
