04 October 2023, Business Recorder
Pakistanis have a huge interest in buying real estate in Dubai due to factors including proximity and “close ties” with the UAE, according to Simon Baker, managing director at real estate firm haus & haus.
“After UAE nationals, Pakistanis tend to be in the top four or five nationalities” looking to invest in Dubai properties, “and this has a lot to do with geography, obviously being fairly neighbouring countries just across the water,” he said in an exclusive interview with Business Recorder.
“And on top of that, the two countries have some quite close ties and bonds. So I think it feels like a natural thing for them to come and invest in the UAE.”
When asked what kind of properties Pakistanis gravitate towards, Baker said preferences vary.
“I live in a villa community by Emaar, and I’ve got lots of Pakistani neighbours. It depends on their individual requirements.”
For investment properties, Baker said his firm “guides people to the properties that are the very best for rental income”.
“We also do holiday rentals, which is like short-term leasing. We furnish the properties and we rent them out weekly and monthly. And that tends to give about 20 percent to 25 percent higher return than renting them out long term.”
He says a lot of investors are going that route and haus & haus manages the units for them. It’s a hands-off process and landlords “feel quite comfortable that we just send them the money at the end of every month.”
“It’s quite a simple investment, if you like, where you’re getting maybe even up to 8 percent, occasionally 9 percent net rental incomes, which is, compared to many places in the world, very high.”
Choosing the right developers is key
When asked for advice for first-time investors, Baker said to “always go with the very biggest developers or government-backed developers.”
“There are quite a few government-backed developers here, which I’m sure many people in Pakistan would have heard of, like Emaar and Nakheel.”
Going with them is the safest option, according to Barker, because it ensures one is buying from someone who will definitely build the property (if going off-plan) and someone “who’s got the proven track record, who will build something of quality.”
He says “ultimately, real estate should be bought with a long term view. It should be something that’s owned for 10 or 20 years that you can rent out, that you can use to create a good rental income.”
“That’s how people build compound wealth in any property market.”
The other piece of advice he gives is dealing with an agent that’s trustworthy, who will not only help find the right property but also manage it and help you to rent it out. Some can even help with arranging finance.
If looking at off-plan properties (one that is yet to be built) he says the pros are you can buy a brand new property with the latest tech and construction material and you could potentially double the money you put down initially “from a cash return perspective”.
On the downside there is a risk that you could wait for a long time and “not make the capital gain you were expecting.”
“I think it really depends on the person’s situation, on their personal finances and as to their expectation and how quickly they expect to actually get the property paid off and start seeing an income from that.”
‘Low barrier to entry’
Baker said the properties haus & haus deals with start at typically AED 400,000 to AED 500,000, roughly $100,000 – $150,000.
Investors would be looking to put around 10 percent of this as down payment, and then break up the remaining amount in 10 instalments.
“We help people with finance overseas and even non-residents can get up to 50 percent and sometimes 60 percent mortgages. And that’s based on the loan-to-value of up to 60 percent.
“So ultimately you’d need something in the region of $60,000 to $70,000 probably to be able to buy a property here. And that would give you something that would create a rental income of maybe six or seven percent net.”
“The barrier is a fairly low entry to the market,” says Barker.
Commenting on the performance of Dubai’s real estate market so far in 2023, Baker said it has “probably surprised everyone a little, compounding on the growth in 2022 and been more than anyone would have really have expected.
“Demand has been through the roof.”
This can be explained by “external factors as well as local market factors that have just created the perfect storm for real estate in Dubai”.
With “everything that’s going on with Russia-Ukraine and in Europe”, more and more people have wanted to move to Dubai, and it has made it an extremely attractive proposition on top of the reasons that already made people choose the emirate, according to Baker.
He said the market has “enjoyed a boom time” post-pandemic and that has continued into 2023.
Looking into 2024, Baker said: “I think the villa market has always been very hot.
“With more and more people there’s the idea of the Dubai dream to live in a house with a garden or maybe a private swimming pool.
“If you’re looking at numbers of units, there are always a lot less villas and townhouse developments in terms of units coming to the market than there are apartments. So I still feel that there’s a strong going to be a strong demand there.”