What Savvy Property Investors Do When The Bubble Bursts?
You are an affluent or a high-net-worth individual wanting to buy investment properties in the UAE.
As per the Global Real Estate Index by UBS, Dubai’s housing market in 2022 seems safe from a housing bubble. However, house prices will keep rising.
In contrast with other major cities of the world, Dubai’s residential market lies in the fair-value territory despite a thriving year.
But what if a housing bubble hits the United Arab Emirates? What will you do to invest in homes after it flattens?
Investors Have More Opportunities When the Housing Bubble Bursts
We are now getting more and more evidence that the real estate bubble has flattened. What does it mean?
Supply outnumbers demand, while prices decrease gradually in some localities and swiftly in others.
Investors like you have more opportunities at hand now. Historically, the rents and prices inevitably realign with the average income in some time. But you don’t need to wait for that to happen. Here is what you need:
Concrete Local Data
You need concrete data about the city/town you wish to invest in to make educated investment decisions. If you are a seasoned investor with a larger profile of properties, it might be challenging to do that for all your properties.
We recommend using software for real estate that helps you automate tasks. It can help you crack the numbers with the help of its reporting feature. Also, this software has a database to keep all information about your inventory.
You can feed the local real estate data on properties you are interested in but haven’t bought, yet. It will help you look at the information.
Identify the Differences Between Different Localities
The home prices in Bur Dubai will differ from Deira. Diera property prices may be lower than the ones in Bur.
Normally, when a local property market does better in times of price boom, it does so as well in the bust.
Local information reveals which areas will have a high demand for homes, the range of rent most tenants can afford, and the investment type that will price best in the area’s housing mix.
Then, you can decide whether a home for sale is ideal for the local conditions.
Increase in Local Income
Can you estimate the potential housing demand in a specific local area?
Yes. By considering the total income of all the residents of an area. Note that we aren’t talking about the average income of the inhabitants of that place.
It tells you if individuals and cash is flowing into a locality. Suppose you find out that the total income of people living in a specific local area increased by 40 or 50% within the last 2 or 3 years.
While in the neighboring areas, the net local income decreased or increased by only 5 to 10%.
You have guessed right that the first area is a better candidate for home prices and rents in the upcoming years. As prices dip, this area offers better opportunities than the latter two.
You can still buy investment properties in low-income neighboring areas. But, you will need to propel a more difficult bargain as you can’t rely on solid future demand.
Spot the Center of the Local Rental Market
You need to determine the range of rents most tenants currently pay in the area you want to invest in — this is the heart of the rental market of that locality.
If you have been renting out properties in the same area and use real estate software to track rent payments, you will have some data on the rents in that locality.
Then, only buy those houses or apartments whose current rent lies in that range. Because if the rent is higher than this average, finding a tenant will become challenging.
It may be easy now, but when the average tenant shifts into another home after two years, finding a tenant becomes a challenge.
When the real estate markets are softening, savvy investors jump in to grab the opportunities while new investors hesitate.
You need to invest in a rental property that doesn’t dip in value and generates a sustainable rental income well into the future.