News sourced from Bloomberg
Emirates REIT (CEIC) Ltd is planning to start Dubai’s first real estate investment trust (REIT), as falling property prices help boost potential returns from rental income. In fact, residential REITs may see 9% to 10% net yields amid the lower prices of residential properties.
According to Vieujot, residential properties were expensive in the past. Nevertheless, the whole market had come down in recent times, but the rental of buildings still would not see a significant drop. Dubai’s residential rental market has remained strong even as home prices dropped most in the world this year.
Jones Lang LaSalle Inc (JLL) reported that rents declined 1% compared to a 10% slump in selling prices. It also predicts continued decline in home prices all the way into 2016 as government rules tighten mortgage lending and a stronger dollar dampens demand.
Emirates REIT (CEIC) Ltd owns properties valued at 2.1 billion dirhams ($570 million) including educational institutions, offices and retail. The company, which is listed on Nasdaq Dubai, plans to invest 1 billion dirhams over the next 12 months.
The new trust is expected to start operating later this year or in early 2016, depending on regulatory approval, said executive deputy chairman of Emirates REIT Sylvain Vieujot. He is planning to spend as much as 2 billion dirhams ($455.5 million) to buy entire buildings in Dubai and within investment zones in neighbouring Abu Dhabi over the next two years. The expected annual yet yield is 9 percent to 10 percent.