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Expat Investor : December 2007
Fast Facts 10462 Fast Facts 10463 Fast Facts 10465 PROPERTY INVESTMENT December 2007 EXPAT INVESTOR 23 Commercial property booming in Dubai Buy-to-let investors return to the market Buy-to-let investors returned to the market as rental growth reached record levels. Tenant demand for rental property has been boosted by declining accessibility, rising uncertainty and a slowing housing market which has reduced the impetus on would-be home buyers to enter into the market, says the latest RICS Lettings Survey. Twenty-nine per cent more chartered surveyors reported a rise than a fall in tenant lettings, up from 15% in the last quarter. Deteriorating accessibility, tight supply and a slowing housing market has kept would-be home buyers in the rental sector, with many adopting a wait-and-see approach. New landlord instructions (an indicator of buy-to-let activity) picked up sharply in the year's second quarter. Twenty per cent more chartered surveyors reported a rise in landlord instructions compared to eight per cent in the previous quarter -- the first time that the figure has moved above the long run average (16 %) in 15 months. There was some further evidence that more heavily leveraged landlords may be feeling the pinch from higher interest rates. In the interest rate sensitive areas of London and the South East, landlords' sales rose above the survey's average. However, at 6%, the percentage of landlords selling their properties at renewal on a national The commercial property sector in Dubai is currently experiencing a similar investment boom to that seen in the residential market three years ago, says DAMAC Properties. In the last 12 months, commercial property in Dubai has seen capital growth of 17% in contrast with 10.2% growth seen in the UK; while annual appreciation over the last two years in Dubai was 23%. This has led to an increase in the number of small-scale investors and private individuals investing in commercial property to benefit from the favourable rental yields and capital growth. Rental return on a commercial property in Dubai is approximately 20% - 25% whereas residential property now typically yields 14% - 16% return. To satisfy this new demand, More homeowners are undertaking home improvements specifically to add value to their property, according to research from Halifax, the UK's largest mortgage lender. Key findings of the Halifax research include: One in four homeowners (25%) undertaking home improvements in the past 12 months did so specifically to add value to their home, an increase from just 7% last year. The majority of respondents (51%) believe that the fruits of their labour will add up to £5,000 to the value of their property. More people are seeking to improve the resale potential of their property through home improvements. One in six cited this as their motivation for home improvements (16%), compared with just 2% last year. This indicates an emerging desire for people to improve, and move. Homeowners believe that fitting a new kitchen or building an extension will add the most value. Halifax valuers agree adding extra space to a property is likely to add significant value. DAMAC Properties has launched seven commercial projects in Business Bay over the last 12 months with some buildings selling out within a month. The main driving forces behind the trend are Dubai's 100% freehold ownership laws, numerous emerging industry clusters in tax free zones and the city's rapidly expanding infrastructure. CEO Peter Riddoch, says, "Interest in commercial property has escalated over the last six to nine months due to limited space to accommodate international companies that are seeking main or regional headquarters in Dubai. The city's plan for sustained economic growth of 11% per annum for the next ten years is attracting more and more private commercial investors seeking high levels of capital growth and rental returns." People rely heavily on their partner (31%), friends and family (14%) when improving their home and for advice on how to finance home improvements (31%). Over a third of people (36%) who had redecorated their home believed that their home improvement work had added up to £2,500 to the value of their property, and almost one in three (29%) thought it would add between £2,500 and £10,000. Almost one in five green-fingered home improvers estimated that their work in the garden would have added over £10,000 to the value of their property. Over a third of respondents who had added new furnishings believed their home improvements could add between £2,500 and £10,000 to their home. Whilst new furnishings -- such as sofas, curtains and light fittings -- can increase the appeal of a property and encourage a quick sale, it is unlikely that they will add any significant value. Commenting on the research findings, Patrick Sawdon, Halifax Valuers, says, "Our research shows that Britain has become a nation of movers and improvers. It's great to see that so many people are investing time and effort in improving their home. A word of caution though -- poorly executed home improvements can actually detract from the value of your property. If you're considering embarking on major work, do consult the professionals and seek any necessary planning permission before getting started." Fast Facts 10461 Fast Facts 10464 basis remains below the previous peak of 10% in the second quarter of 2004. Looking forward, surveyors expect rents to reach record growth rates in the coming months. In particular, surveyors expect a surge in rental growth for flats as first time buyers watch for the impact of interest rates before taking the plunge. RICS spokesperson Jeremy Leaf tells Expat Investor, "Current economic uncertainty has created an ideal platform for buy-to-let investors to cash in on rising rental levels. Many would-be buyers have decided to wait and see how the interest rate cycle will affect the market." Homebuyers gazumped out of nearly £200m pa English home buyers could be forking out up to £290m annually in pointless surveys, searches and lawyers' fees after being gazumped at the last hurdle, according to a new study from fool.co.uk. With house prices rising at 0.4% in the last quarter, the market is becoming increasingly competitive. A study of over 2,000 homeowners reveals that over one in 10 (12%) had been gazumped in the last year -- 12% of which have been gazumped more than three times in their search for their dream home. Despite many homebuyers experiencing the negative effects of gazumping first hand, many seem resigned to the phenomenon, with over a fifth (22%) admitting they have or would consider gazumping if they found their ideal property, and over one in 10 (11%) citing it as a 'necessary evil'. The study also revealed: almost three-quarters (73%) of homebuyers think gazumping should be made illegal. over one in 10 (12%) of homebuyers who'd been gazumped were upset enough to stay out of the housing market and remain in their current property. almost a quarter (24%) admitted they were emotional, angry and humiliated following their gazumping experience. Gazumping victims can have a hard time financially following the experience. Almost a third (28%) said that as well as losing time, they were left seriously out of pocket, and 12% were forced to up their bid in order to secure the property. Over one in ten (12%) had to settle for a lesser property after they'd been gazumped. What gazumping costs lawyer fees -- £1,500 local authority search -- £220 drainage search -- £44 environmental searches -- £34 indemnity insurance contribution -- £25 chancel liability search -- £18 official search -- £9 Top Tips to avoid gazumpers 1. Get your finances in place early. 2. Ask your vendor to take the property off the market once your offer has been accepted. 3. Keep the seller's estate agent informed at all times about the progress of the purchase. 4. Stay in regular contact with the seller, and try and establish a bond -- friendship is often more valuable than money. 5. Do all you can to speed up the purchase -- the faster the deal goes through the less chance your seller will pull out. 6. Keep an eye on the property market especially if prices are rising quickly -- being forewarned is being forearmed. 7. Consider gazumping insurance. The UK is a nation of movers and improvers As the government launches the second phase of its home information packs (HIPs) initiative, the National Association of Estate Agents (NAEA) has warned that the three bedroom homes market is likely to suffer as a consequence. The Association's latest survey of members has revealed that following the first phase launch on 1 August the number of four bedroom plus properties on the market decreased in many areas. As many as 63% of agents reported decreases in the number of larger properties on their books over and above the seasonal norm. On average agents reported drops of 37%. Homeowners staying out of the market to avoid HIPs was cited as the main reason for the decrease. Peter Bolton King, Chief Executive at the NAEA, comments, "Our concerns have always been that the introduction of HIPs would lead to a lack of supply following implementation. "This does indeed seem to be the case with four bedroom homes and is now likely to be replicated in the three bedroom homes market. The next few months will prove crucial in seeing whether HIPs are going to cause the sort of problems we feared." DAMAC Properties' Water's Edge development. Three-bedroom homes affected by HIPs Amount homeowners expect improvements will add to property Rank Main Home Improvement Up to £2,500-- Over Undertaken £2,500 £10,000 £10,000 1. Redecorating 36% 29% 16% 2. Garden improvements 37% 28% 19% 3. New furnishing 31% 35% 17% 4. Laminate/ wood flooring 27% 29% 25% 5. New bathroom 18% 37% 24% ANTICIPATED FRUITS OF THEIR LABOUR: Above: DAMAC Properties' Lincoln Park development. IPI launches commercial loan Irish Permanent International has launched a commercial mortgage loan for commercial property located in the UK, Isle of Man and Republic of Ireland. IPI confirms that "A competitive mortgage rate and tailored commercial finance terms are quoted on a case-by-case basis and are available as a sterling, euro or US dollar commercial loan. Up to 80% loan-to-value is available on individual properties valued at a minimum of £300,000." This new product is available to offshore companies and trusts, employed or self-employed individuals, foreign resident nationals, and UK, Isle of Man and Irish expats. The mortgage loans can be used for the following types of commercial property: retail / residential mix, offices, retail shops, industrial units (light modern professional practices (lawyers, doctors, accountants).
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