What begginers, moaners and knockers really need to understand is how to value a property. How do you actually value a property???Well there are a few ways, but id suggest the best way in terms of an investors perogative, is to look at what both types of buyers in a market are prepared to pay for a property. Who are the players? The players are both investors and potential home owners. PROFESSIONAL investors generally invest for cash flow/yield. They understand that most property will rise over time, but they want it cash flow positive so they can continue expanding their portfolio, and look after the cash flow whilst the property rises look after themselves! Home owners buy to live there. So how can we ascertain a property`s value using these two groups as measures. Well, generally the shrewd investor will pay a price where the rent is at an annual yield of the gross price of the property ABOVE the interest rate they can earn in more common investments like bonds, stocks and depositing cash. So if we look at int city in this perspective, there is still much room for capital growth until the sale price makes it totally unattractive to an investor in terms of yield. All the disgruntled people who are concerned over yield seem to be those losing on exchange rates! Exchange rates go up and down. The gross yield on the majority of apartments in int city are above 10% in the base currency of UAE dirham! Which is very good for a new build! We can also gauge what a property is worth by actually taking a close look at the potential home owner. Potential home owners in general can borrow on average, 3 times their salaries with an initial commitment from their own funds, normally in the region of 10 to 30% of the house/apartment price. So if we look at the average earnings of people in dubai AND of the potential ex pats arriving in Dubai and multiply it by 3, we can also gauge when a property is overvalued, because the property simply becomes out of their price range. Int city is WELL below this watermark. Also the mortgage market in dubai is a) primitive BUT rapidly evolving and b) in regard to int city, only just emerging. When you have a situation that is attractive to BOTH these participants you are pretty darn close to a property hotspot..... investors will be bidding a price until the sale price to yield ratio becomes unattractive, and the homeowners will continue buying until it becomes unaffordable! When this situation occurs, who`s left to buy??? No one! The homeoner has to borrow more and more until they can borrow no more AND the investor isnt interested because the yield is poor. Cometh the fall!!!This is when you may want to think about selling! NOT when you discover the skirting board has been chipped or the paint is smudged or the smell of **** (which incidentally is being addressed and should be resolved by chrimbo this year) is bad, or the developer has behaved in a way that 99% of developers behave.
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