Timing Investments in Real Estate

There are various factors that need to be taken into consideration when investing in real estate. Since its an ‘intertemporal choice’, timing is a critical factor as it requires taking into consideration long term personal/investor’s circumstances and external factors, most of which are likely to be changing beyond one’s control.

Among personal/investor’s circumstances factors that need to be taken into account include one’s ability to have enough to secure a down payment on a mortgage, affording a monthly mortgage payment and have a good credit score. Among external factors lower interest rates make mortgage payment easier, supply and demand conditions of the preferred type of real estate and banks’ credit conditions play an important part. Moreover, if the choice of investment happens to be in another country, then exchange rates along with local property regulations play a critical role too.

PWC in its recent report titled ‘Emerging Trends in Real Estate: Europe 2017’ stress that the real estate market is changing with new realities emerging in response to the altering economic landscape especially in the case of Europe. The report states that the centre of gravity of real estate market is shifting from real estate as a financial asset, to real estate as a product and more significantly, to real estate as a service. Therefore, in addition to the importance of timing of such an investment, the benefits/ gains that an investor expects to receive makes investments in real estate multi-faceted.

Dubai is one of the world’s top 30 most dynamic cities, according to JLL’s City Momentum Index. According to the index, Dubai enjoys this ranking based on the speed of change of the city’s economy and commercial real estate market. This has made the city one of the most attractive destinations for architects and developers while expats and investors from all over the world seek both ownership and capital gains. However, the global financial crisis in 2008 and the impact of lower oil prices coupled with fiscal consolidation in UAE in 2015-16, has slightly altered the real estate market dynamics, atleast in the short run, thus making the situation for investments ripe for some while making other investors cautious.

According to Bayut the first half of 2017 witnessed a balancing act in the UAE’s real estate market. In both Dubai and Abu Dhabi, the average property price recorded a decline, compared to the prices in H1 2016. This decline is largely concentrated in residential properties. Despite this trend, Bayut states that the return on investments (ROI) has remained fairly stable at 4.7% for Dubai and at 5% on average for Abu Dhabi.

In the same vein, JLL-MENA in its Q1 2017 report, state that the fall in employment and a rise in mergers taking place in UAE’s economy in response to overall consolidation, have contributed to increased vacancy rates, downsizing and a short term decline in residential rents and prices. However, retail, office space and hospitality markets have remained relatively stable.

Therefore, for expats with the capacity to invest, this may perhaps be the right time to buy a property as many real estate players are expecting the property prices to bottom out in 2017. However, for international investors, the gradual but sure hikes planned by the Fed coupled with the strengthening of the US dollar, is likely to erode the purchasing power of investors in the short run.

The Forbes Middle East anticipates that consolidation in oil and gas and related companies, sluggish wage growth in the wider economy and inflation are set to drive down residential rents in 2017 in Dubai. Furthermore, it is expected that Dubai’s residential supply will increase by approximately 2.5% in 2017, representing an addition of around 10,000 new units. For buyers this may present as a good time to benefit from lower property prices but with a clear understanding that returns may be slower.

5 thoughts on “Timing Investments in Real Estate

  1. In Dubai, occupancy rates remain strong due to reasonable demand and
    limited supply. In addition, there is growing interest and construction
    in areas such as Business Bay and Silicon Oasis, historically seen as
    secondary locations. Al Masah has demonstrated that they knows the key market which help’s assist in investing on the real estate for high returns.


  2. I predict that the international Grade A offices will continue to perform well in Dubai in 2017, with well-specified, single ownership assets having the potential to secure pre-lets from large corporate occupiers. I also anticipate that facilities and amenities will continue to be big differentiates in Dubai’s office market in 2017. Leading retail, hospitality and F&B amenity is to continue to drive demand at the Dubai International Financial Centre, the World Trade Centre and Madeira Lakes Towers.


  3. I was a bit sceptical about the market demography as investing in MENA required quite an analysis on economy solidification which might help in expanding the opportunity rates, Scalability , Thankfully, The good people at Al masah pointed me on the right direction to make a wise move, And I did invest in MENA. Now per the Q1 2017 report, The general solidification on fleeting is decreasing drastically.


  4. I believe that the Middle East is anticipating that the oil and gas would solidify the sluggish wage growth, That may help the widen the inflation driven residential rents in Dubai. I was lucky enough to invest in real estate prior to the market collapse. I would like to imply that the returns are marginally slow.


  5. Al Masah Capital continuously discover and fulfill ones needs. We live and flip homes in beautiful Mena, Arkansas area. Thus, our needs vary extensively, i.e., continuous searching for possible homes to purchase, coordinating viewing, negotiating contracts, attending closings, coordinating inspections or surveys, monitoring progress of completion of homes, and re-listing. Many thanks to Team Al Masah Capital for the years of personal and professional courtesies extended.


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