GCC Markets Suffer Due to Weak Global Environment

By Mohammed Waseem

Investing in the GCC is a good opportunity for foreign investors, be it real estate or the stock market. There are limitations, however and recently the market has been affected quite badly. Property firms and banks in the UAE have been performing badly according to Al Arabiya. However, the risk sentiment has been driving the real estate sector in the UAE.

The underperformance was because of the weak global environment; many leading companies sank and that affected the investors badly. The fall was between 2% and 4% for most companies. Some companies in Saudi Arabia however saw growth even during this downfall. In addition, the central bank chief of Saudi Arabia says that Saudi banks are in a very strong position; they have a capital adequacy ratio of 17.8%, which is way above the minimum specified by Basel standards.

UAE Markets SufferThe central bank of Saudi Arabia is working on maintaining this position and for emphasizing on stability. The country attributed the stability of the market amidst global unrest and turmoil to the balanced monetary policy. The kingdom has also seen an upgraded rating from the rating firm, Fitch Ratings; from an AA- rating, they were upgraded to AA. The kingdom has also been working hard to address other issues including unemployment.

Even though the market is generally weak, Khaleej Times reported that 52% of the UAE residents express confidence in the UAE’s banking system. The conclusion of the survey conducted was that UAE financial institutions are trustworthy enough but they have to do more to convince the rest of the residents to keep their savings onshore. Most of the residents of the UAE are expatriates and they send their earnings back to their countries.

As far as investment in real estate is concerned, UAE court decreed that non-freehold property would be available only for GCC nationals and not all the residents or foreign investors. Freehold property is however available for foreign nationals for investment. In the next article, I will discuss about the freehold property investment in the UAE.

Why You Should Invest in Real Estate

By Joyce Morse for HeadlineFinancial.com

If you are looking at solid investment opportunities, you might want to consider real estate.  While many people have avoided this area because of the housing market devastation, it bears another look.  Real estate can provide one with a great return on investment and a continual income, and it will continue to do so in the future.

Nowhere to Go but Up

Beautiful house, modern house

When the housing market bottomed out, many potential investors looked elsewhere for investment possibilities.  However, real estate works just like any other market; buy low and sell high.  Right now, we are in the buy low time period.  Here are some reasons to look into real estate for your investment portfolio.

  • Mortgage rates are low so you will pay less on interest.
  • More foreclosures mean more renters to allow you to use your property as a rental.
  • Houses are at their lowest prices in years because they have not been increasing in value at the same rate as normal.
  • Tenants often prefer houses to apartments, which means you will have a good selection of renters and be able to find the best tenants.
  • Renters prefer private landlords instead of rental companies, so you will have people competing for your house.

A Long Term Investment

You have to look at real estate as a long term investment, not something you buy today and sell tomorrow.  Even if you buy a property to fix it up and sell it, you will want to have a positive cash flow, and see the value of your investment rise over the long term.

If you buy a house today, it will have a higher value in thirty years, making it a profitable investment.  If you use it as a rental property in the mean time, you will have tenants making your mortgage payments for you so you come out even further ahead.

Tips for Investing in Real Estate

To be successful in the real estate market, here are some tips to follow.

1.  Know the average prices in the market.  This includes what similar houses to the one you are looking at are selling for and what rent is worth on that house.  That way, you will know what you need the mortgage payment to be for the rental income to cover it.

2.  Get an appraisal and an inspection.  The appraisal will show you what the house is worth and an inspection will alert you to any major repairs you will need to do in the near future.

3.  Work with a respected real estate agent to help you make the right decision.  They can explain terms to you and give guidance about the different properties and the surrounding areas.  It is worth the agent’s fee to have a knowledgeable expert to assist you in the process.

Real estate has always been and will continue to be a good investment.  You just have to know what to buy to get a good deal.

Is Land a Good Investment in 2012?

recently wrote about buying rental housing with positive cash flow as an investment. That’s a great strategy in 2012. Buying land, however – building lots, for example – is not as promising this year. There’s still not a lot of new construction going on, and most of that is replacement or renovation.

Building lots are generally not cash flow properties. You’re depending instead on future price appreciation, and in this market that’s like depending on a sand castle.

A prepared building lot for a new house.
A prepared building lot for a new house.

Still, land is not a bad investment if you’re buying cash and are prepared to hold onto the land for a few years. Don’t take out a loan or go into debt in any way. If you can afford to buy a building lot just outside of town in the direction of future expansion, and hold onto it for a while, it could be a profitable strategy.

How long should you be prepared to hold onto your land investment? Quoting Leonard Baron on Zillow.com’s blog (Baron is the author of several books including “Real Estate Ownership, Investment and Due Diligence 101 – A Smarter Way to Buy Real Estate”):

“Some general guidance herein. As a general rule, if you are not planning to own it for at least five years you will most likely not be adding to your wealth. Any appreciation in value will not compensate for the 8.0% to 10.0% transaction costs on the buying and selling of your property.”

Real Estate Investing – Is 2012 the Time to Buy?

In a still sluggish real estate market, is this the right time to buy?

Yes and no. There are many kinds of real estate. Commercial properties in hot markets, commercial properties in depressed markets, high-end residential homes, low-end foreclosures, rural land, urban land…

One area of real estate investment that may represent an opportunity right now is rental units, whether apartments, condos or homes. Property consulting firm John Burns Real Estate (JBRE) has forecast that home-ownership will fall from 70.0% to 62.1% by 2015 thanks to a soft economy, low consumer confidence, limited mortgage availability, increased rates of foreclosures and short sales, among other things.

Apartment buildingWhat this means is that we’ll see a rising number of renters in coming years, and greater demand for rental housing.

What we want as investors therefore is rental housing in areas with good projected future job growth and price appreciation.

According to NuWire Investor, some areas expected to grow and appreciate well in the next ten years are:

  • The McAllen-Edinburgh-Mission, Texas metropolitan area.
  • In Colorado: Colorado Springs and Denver-Aurora.
  • In California: Sacramento-Arden-Arcade-Roseville, and Oxnard-Thousand Oaks-Ventura

Bargain-priced rental housing with positive cash flow has always been a good investment, and continues to be a great opportunity. Do your homework, don’t overextend, and don’t be afraid to act.