Dubai: Like international investors, wealthy individuals in the UAE continue to see property as a key long-term part of their investment strategies. Investors are still hesitant to invest in the local real estate market, but this is not largely due to the downturn per se.
Industry experts, however, say millionaires are now changing their investment approach and are looking at spreading their wealth over different types of properties and lucrative locations.
Earlier, those who had cash to burn invested disproportionately in the local market, creating an unhealthy "imbalance" in their portfolios. Many were chasing one asset class in a single market, something that financial experts consider a risky approach.
"Investors were not only over-exposed to property as an asset, they were over-exposed to property in one geographical market, and often, these investments were not diversified across property asset types," Jesse Downs, director of research and advisory services at Landmark Advisory, tells Gulf News. "Now, we're seeing investors rebalance their portfolios, diversifying more across property asset types and geographical markets," she adds.
Hesitation
She confirms there is still hesitation among investors in the local market, but this is largely due to the uncertainty as to whether or not the sector has bottomed out.
"Personally, I don't think we have, but not all assets are equal. Select assets are worth purchasing now because they are close to the bottom. However, most investors are still waiting on the expectation that prices will decline further," Downs adds.
Steve Gregory of Holborn Assets, says speculators and risk-takers comprise the majority of the investors in the UAE. He says the appetite for risk in the country is even higher than in the US, UK and Germany, which (apart from Japan) hold the highest number of millionaires in the world.
"Investors in the UAE fall into two camps. There are those who seek preservation of capital and those who look to speculate. The speculators are in the majority. If their companies are making profits of 20 per cent or more each year, why would they look for returns on investments that would be lower than that?" says Gregory.
With regard to investment and sentiment within the Dubai property market itself, Elaine Jones, CEO of Asteco Property, says they are now seeing a "more canny and scrupulous type of investor." She says the market is also starting to show signs of recovery.
"As with any real estate market recovery, certain patterns always seem to emerge. Liquidity increases, the banks start to lend; property prices and rents stabilise, enquiries increase from both investors and owner-occupiers; investment confidence and market sentiment grows… That is exactly what is happening here in Dubai and UAE," Jones says.
"The funds that we advise, both private and sovereign, are actively assessing opportunities and we are confident that we will transact on a number of assets in the coming months. That being said, there is no appetite for speculative risk-taking without secure financial guarantees in place," she adds.
Have your say
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