Million-dirham Dubai property question: Location, location, loc... or just price point

Investors focus on seeking prime assets in 'well-established locations': JLL survey

Is it all about “location” when it comes to buying real estate?

Well, institutional investors in Mena believe so. They have struck to the old adage: location, location and location when purchasing real estate.

Jones Lang LaSalle (JLL)’s seventh Mena Investor Sentiment survey reveals investors do focus on seeking prime assets in “well-established locations” while political stability is also an important factor when taking those decisions.

But for individual investors, primarily in Dubai, is it location or price the primary factor?

Opinions are diverse: Those with deep pockets look at location and quality, while those seeking an abode to offset rent hikes in future emphasize on price.

S Mayur, a top management executive with a Dubai-based bank, says: “I have been in the emirate for some time now and I have purchased a villa on the Palm. For me it is certainly ‘location, location and location’.”

He adds: “I am willing to pay a higher price for location. I want to buy something which appreciates over the time and has resale value. The Palm is a unique project and I certainly believe there will be demand for it, forever.”

Praveen Kumar, who owns a number of apartments in Dubai, admits: “I did buy properties during the boom days but then my decision was never based on location, it was price that mattered since I wanted to flip them and make profit. But the financial crisis came in and I was stuck with units where prices dropped significantly.”

But in early 2010, Kumar bought two apartments in Dubai Marina. This time, he mentions, it was a location-driven investment.

“People were selling at discount and as I was a cash buyer I managed to get the units at decent price. Over the last two years, there has been a substantial price appreciation on these units and I do expect prices to go up further next year.”

In April, a joint study conducted by the Roads and Transport Authority's Strategic Planning Department and Dubai Real Estate Regulatory Agency found there was high demand for properties closer to the Metro stations which has resulted in their prices soaring by between seven and 34 per cent.

The study had monitored the changes in rates of these lands and commercial properties in 2011 compared to the rates prevailing in 2009 before the opening of the Metro.

Cluttons, an international real estate consultancy, in September said proximity to Metro stations in Dubai is now a factor affecting prices with the majority of areas close maintaining demand and increase both capital and rental values.

Feroz Sheikh bought an apartment in Dubailand. The value of his apartment is almost 50 per cent lower than what he paid for in 2007.

“I rue my decision of buying during the real estate frenzy. I too, as others, hoped to sell my unit for a premium, but it never happened. The financial crisis had a severe impact on Dubai real estate, prices slumped and my investment turned from good to bad.

“Though property prices are improving in Dubai, we don’t expect any exceptional recovery for my unit and that’s because of location. It’s localities close to the Sheikh Zayed Road that are witnessing demand… I don’t see prices here going up unless the entertainment district of Dubailand comes up,” he states.

US-based Citibank has revealed previously that recovery of Dubai’s real estate sector has been in line with the wider economic upturn and strong economic fundamentals of the emirate.

“Dubai’s economic rebound and improved investor sentiment had breathed life into the real estate market in recent months with the volume and value of real estate transactions carried out in the emirate mushrooming since the beginning of the year,” the bank has said.

International property consultants too have reported villa prices rising by almost 20 per cent year-on-year, while apartment price appreciation have been a tad slow at seven per cent year-on-year.

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