A certain degree of risk
All investments involve a certain degree of risk. Investors may not gain the original investment; investors must take note of several factors before deciding to invest in an asset. The investor must take note of the past, present and future performance of a certain investment. The rate of return is used to measure the return of investment the customer and how much earnings must the investor gain. The economy must also be considered in the investment selection process because it could determine whether the market has a high growth of potential.
The investors must also check out the business environment in order to have an idea on the future prospects and risk. The market risks must also be checked by the investors. The real property surges in Dubai may be credited to the difference in the authorities that govern the country following the death of Sheikh Zayed, the patriarch of the United Arab Emirates, along with the new chattel laws that took effect early August, 2005 For the first time the UAE constitution permitted the citizens to acquire and negotiate land in Dubai, it can be noted that the land teure was then based on ‘gifting’ and was regarded for use of the recipient alone.
The new order also allowed GCC nationals to acquire freehold real property along assigned areas while emigrants was given the chance to invest on long term rental contracts up to 99 years within the assigned zones, these contracts were also deemed renewable. Along with this radical changes in legislation in real estate, the creation of real property companies that were granted access to lands in these selected zones. Two companies gained success in the IPO, the Sorough and Aldar Properties.
This presented a similarity with the launch of Dubai’s Emaar Properties Initial Public Offering done in 1997 with Sheikh Mohammed’s decision regarding land acquisition of foreigners in 2002. In consideration of Dubai’s booming economy, the new Dubai regime also embarked on a magnanimous financial venture programme that sponsored Dubai as a tourist destination. The development of the 300 square kilometre industrial cluster zone was noted as a push for industrial development. Again the model appeared to be Dubai with its successful tourism sector and free zones.
Rate of Return in real estate The Rate of Return on Investment in Dubai is considered to be high. The National Bank of Dubai’s European Real Estate Fund (2007) had announced to the public the projected return of 15% annually was exceeded by the bank’s performance (Internal Rate of Return). Based on the Report of the NDB, the 2006 had shown a increase in commercial Property Investment within Europe. Increase shares had grown up to 50% which represents 41 to 46% of share in the global trade.
As a result of this increases, NDB stated that there had been higher prices and lower yields. This had increased the investors and shows an excellent potential in terms of the rate of return for investments. Evidence on a good rate of return is the Dubai Investment Fund. The Dubai Investment Fund is a joint venture of the Investors Provident and Caledonian Investments Ltd. (investorsprovident. com 2005); this investment fund had sought to diversify investment in the areas of residential, commercial and industrial projects in Dubai and within the Gulf Region.
The fund aspires for a yearly increment of 15 to 20 percent capital growth rate. Previous projects have revealed a 30% rate of return. Projections have been made for the first four years using the yearly growth rate of 15 to 20 percent. Low Taxation System in Dubai Real Property As stated in the Taxation system, Low tax is being implemented in Dubai. Foreign Investors are attracted to the situation because the investors would be able to gain more income. For example, a two bedroom flat might cost $100,000.
This amount could have been saved by some investors in tax. Investors could save a large amount of money because of the low tax situation in the country. Cheap Prices of Real Estate As compared to other major cities in the world, property in Dubai is cheap. According to Nicholas Marr (2006), the director of Marr International Ltd, Dubai Villas only cost about one grand per square meter. On the other hand, London Apartments in Docklands costs at around $5,000 square meter. In terms of price, there is a very huge difference between the two.
Comparing the kind of property being compared, a person can have a villa in Dubai costing a thousand dollars and a person can have an apartment in London with the cost of $5,000 per square meter. Villas are more luxurious than an apartment, so there is also a quality property comparison. High Economic Growth Dubai can be considered as a city of opportunities and has a high economic growth. As stated in the economy portion of the paper, the country has a very high economic growth in the recent years.
A high economic growth means that the economic situation in Dubai is improving. A good investor always thinks about the situation in the place that he is investing in. If a place has an improving economy then this means that it is favourable to invest in that particular area because chances are the rate of return on investment could become higher. Dubai is also known for its twenty year record of economic growth. Based on that information, the foreign investors can note that the country’s economy had a constant growth.