There can be few markets in the world which have delivered the phenomenal returns seen in Dubai over the last few years and while the market may be showing signs of a slowdown a lot of people have made a lot of money during the period. However, the market of Dubai opens a very interesting subject about exit strategies, do you need them, what are your options and how do you follow them through?
Many people may look at the idea of exit strategies and just assume that you buy and you sell when the time feels right, but there really is more to an exit strategy than this and it is something which you should seriously consider before you regret it!
Let us not forget that the vast majority of properties acquired overseas are for investment purposes and the best way to increase your investment pool is to know when to buy and more importantly know when to sell – the selling side is just as important as the buying side.
While there are decisions to make and opinions to appreciate, at the end of the day it really is down to you, if you listen to the property salespeople they will often encourage you to move your money around the market, as they make money out of each sale but if you listen to market sceptics you might never buy in the first place. So what do you need to consider when investing in Dubai?
Some pointers to consider are :-
The general market
While you would assume that this is THE most vital element of any exit strategy it is actually only a cog in the wheel which will see you decide when is the right time to sell your property. You need to keep a close eye on the general market but you also need to watch any niche market you may be in. If for example you were depending upon a certain group of overseas workers to rent out your property and they were all sent back ‘home’ what would you do?
The main market might be fairing well but you might have a property which depended on a specific area of town, of which the financial landscape might be changing. You also need to keep an eye on the worldwide economy and property market trends because as we are seeing now, even places such as Dubai are not able to swim against the tide forever.
Comments from the experts
Never take the comments of each and every expert to heart as for every buyer you will get a seller, it really is as simple as that. Maybe you have a favourite expert you listen to, someone who has done well in the past in your market?
In general experts will only pop up into the limelight when they either make bold statements or they get a call correct. However, when they called the top or bottom of the market, what had they been saying over the last couple of years? Had they been calling the top for 3 years and finally got it right?
While you should appreciate the opinions of those who have been there and done it, having the track record to prove it, remember that experts are only news worthy when they get it right.
Your financial situation
This may seem like a strange statement to make but when looking at your own exit strategy you need to keep a close eye of your own finances. Too many people have been afraid to sell their investment, instead putting themselves under more and more pressure until they are forced to sell at the wrong time and the ‘wrong’ price.
An investor that over stretches themselves will at some point be under severe pressure to make a decision and the added pressure could mean they make the wrong move. There is nothing wrong with gearing up your investment pool but it needs to be done in such a way as to leave your mind clear to think about the property itself and if you do need the money then sell up and move on – there is always tomorrow.
Target return
If you invest in any market it is vital that you go in with an open mind but a rough idea of the kind of investment return you are looking for. There are two factors to consider here, do not be greedy and adjust you target return if the environment changes. Fear and greed are an investor’s worst enemy, the fear that you might miss out on an extra pound and the greed factor when you just want more. Selling is the hardest thing to do and in many ways buying is easy!
Government moves
Dubai is a prime example of a country where the authorities like to keep very close control of the property market. While they fed the monster on the way up they are not afraid to introduce additional regulations to constrain the market such as rent restrictions, an improved legal framework and tax changes.
A change in the law which affects the property market, overseas investment or similar areas can and does have an impact on property markets. Try to keep yourself up to speed with what is happening and appreciate what affect the changes may have and realign your exit strategy accordingly.
The Dubai market
The Dubai market has moved from an emerging market to one which is more developed but still has some way to go. In the very early stages there were chances aplenty to invest in the region and regulations were fairly thin on the ground. However, as the market has grown we have seen more and more regulations introduced to the mix, some which assist the markets and others such as the restriction on rent rises which are introduced to prevent over heating.
We have also seen the emergence of a more robust legal system which reflects the growing position which the Dubai property market has in the world. Whether we will see a switch to more traditional overseas markets as and when the worldwide economy recovers remains to be seen but investors need to try and look forward and imagine what could and should happen – Dubai will not be a property hot spot for ever.
Conclusion
Dubai is a prime example of a market where an exit strategy is required as you need to consider the local opinions on the ground, the worldwide economy and the various regulation changes and introductions by the authorities. There was a consensus that 2010 would be the year the market peaked but how can this be common knowledge and taken as ‘fact’ when nobody really knows?
If 2010 was the year when everyone was going to sell surely you would not want to chance being the last one left in the market, after sellers had pushed prices lower and lower. In this instance you might consider an exit strategy of selling before the crowd in order to miss any selling frenzy.
As Lord Rothschild once said ‘The reason I am so rich is because I always sold too early’. A very true fact and one which we should all bear in mind.