UAE
Think outside the box
SA investors set their sights on unexpected market
BY TRACY BARTLETT
V
iable offshore options for South African real estate investors have steadily decreased during the past decade.
As the Rand has suffered blow after blow, affordable opportunities have lessened, especially in sought-after hard currency markets. However, recent economic fluctuations, market shifts, and legislative amendments in Dubai have made the United Arab Emirates powerhouse far more accessible and attractive to SA investors who hold financial reserves.
Shelley Kruger, Global Property Consultant in Dubai for Sotheby’ s International Realty, explains:“ Underpinned by a strong Dollar and weaker oil prices, several factors have precipitated a notable transformation of Dubai’ s residential property landscape and buyer demographic.
“ The traditionally investor-led marketplace has transmuted into a more mature end-user market, prompting the larger developers to shift their focus to smaller, lower priced properties aimed at middle-income investors that, in turn, are attracting a growing number of first-time buyers.”
Globally accessible
The entry level price of studio apartments in Dubai is approximately R1.75 million
– on par with property prices on Cape Town’ s Atlantic Seaboard. Three-bedroom freestanding family homes are priced from around R7.5m, while large luxury villas are priced between R17m and R35m.
“ Investors are also benefitting from the recent drop in property prices, particularly in the entry to mid-level markets where the expanding supply of affordable housing has seen apartment prices falling by 3 % between the first and second quarter of this year.”
According to the latest analysis report from Asteco, The Middle East’ s largest full service real estate company, buyers now have more payment choices as developers seek to attract investors who may be struggling with the high loanto-value ratios stipulated by the UAE Central Bank.
Kruger notes that the data from Asteco further reveals that rental rates have dropped by 7 % year-on-year and a downward pressure on apartment rents is expected to continue as projects are completed and delivered to the market.
End-users are benefiting from the low interest rates offered and often land up paying less for a mortgage than they are for their rental rates for a comparable property. And, although rental prices have stabilised and helped ease consum- ers’ cost of living burden, investors are assured of a solid and secure asset as the rental market is strong and decent rental yields can still be achieved.
Staying put
Dubai has long been a popular destination for South Africans who want to gain work experience abroad and earn a nest egg of hard currency to bring home after two or three years of hard work.
However, according to Kruger, many SA expats are now staying on in Dubai for longer periods, making the city their long-term home rather than a pit stop.
“ Most South Africans initially rent a property when they arrive in Dubai, but it is becoming common practice for expats who remain here beyond an initial short contract to invest their rental money and rather make mortgage repayments.”
Lew Geffen, Chairman of Lew Geffen Sotheby’ s International Realty in South Africa, says until 2015 many expats were discouraged from buying property because, although United Arab Emirate law allowed expats to have wills according to the provisions of their native country, it did not include property.
“ New rules set in place by the Dubai International Financial Centre( DIFC) now allow non-Muslim residents to be
52 NOVEMBER 2017 SA Real Estate Investor Magazine