With Dh42 billion worth of transactions in the first 45 days of the year, the real estate market has already started showing an upward trend. Last year, the total real estate transactions exceeded Dh259 billion. The head of Dubai Land Department (DLD), Sultan Butti Bin Mejren expects the market to gain further momentum in the coming months and in the run-up to the World Expo 2020.
The announcements of large infrastructure spends at the Expo site, new property launches since the start of the year, along with softening property prices, innovative payment plans and many other external factors, are expected to further stimulate the inflow of real estate investments in Dubai’s real estate sector.
We look at a few of the market boosters that are expected to make Dubai real estate a worthwhile investment choice this year.
Expo contracts
This year the government will award 47 construction contracts worth Dh11 billion towards infrastructure projects at the Expo site. The move is expected to accelerate economic growth in the city. A further 98 non-construction contracts valued over Dh360 million will also be distributed before the end of the year.
“Infrastructure development has a direct correlation with real estate in an economy,” explains Mansi Saxena, marketing director of SPF Realty. “This announcement is likely to boost the housing demand and over the next three years contribute to an increase in prices in the real estate sector. Given all these factors, it is likely that more and more buyers who have been playing a waiting game will start investing now in expectation of capital gains over the next three years.”
Visas to Russians
The UAE recently implemented a visa-on-arrival policy for Russian citizens. In the past two years, the UAE has seen 600,000 Russian visitors, with the new visa regulation expected to draw more visitors to the country.
“The recent ruling on the visa norms for Russian citizens arriving in Dubai will surely have a positive impact on the region’s tourism and will strengthen ties between both nations,” says Rajiv Ghanekar, senior real estate broker at Keller Williams Real Estate Dubai. “In the long term, this could serve as a trigger for an increase in Russian investment in Dubai’s real estate sector.”
Chinese buyers
Similar to the Russians, Chinese citizens also receive visas on arrival in the UAE, due to an exemption policy that came into force in November. The Dubai Tourism recently reported a massive 20 per cent boost Chinese tourists in the last year to reach around 540,000 visitors. According to the DLD, Chinese investors invested Dh1.74 billion in Dubai property last year, ranking China among the top 10 countries.
The Chinese property portal Juwai.com predicts Chinese overseas property investments to hit $220 billion (Dh808 billion) by 2020. “It is surprising that Dubai does not rank yet in their top 10 global property investment destinations, but we are already witnessing an enormous amount of Chinese buyers in the market, willing to invest in high-yielding properties,” says Ghanekar.
Ghanekar believes the current buying spree is just the tip of the iceberg. “I would rate this as a key booster having the potential to change the complete outlook of Dubai’s property market,” he says. “Furthermore, Dubai’s ongoing [efforts to build] a world-class educational hub would attract Chinese and various other nationalities into the region, as they would not have to travel as far as the US, the UK or Canada to seek quality education.”
New supply
While several potential buyers may continue to hold back investment decisions, new property launches and announcements happening in the city are broadening housing and investment choices for purchasers.
Among some of the latest announcements in the city, Sobha Group will build up to 80 quad homes at its Sobha Hartland project in Mohammad Bin Rashid City; Riviera Group will bring a 22-storey apartment block in Jumeirah Village Circle (JVC) and Kerzner International will deliver 231 residences and 795 guest rooms in Royal Atlantis Resort and Residences. Construction work for Dubai Properties’ 46-storey 1/JBR tower is also set to begin, and the developer’s La Quinta in the Villanova residential development in Dubailand is also among some of the new projects in the city.
“Developers are launching now as the Expo 2020 is just around the corner,” says Laura Victoria Adams, managing director of Carlton Real Estate. “[They] believe that any project needs to be completed by then for them to capture the hype.
“[For example], Marina Gate, Dubai Marina, by Select Group in partnership with Jumeirah Living, is launching its third building, offering serviced apartments. When there are a lot of successful launches, we do notice a slowdown in the secondary market, but off-plan is good for the future of Dubai and will offer a larger selection to buyers.”
US politics
US President Donald Trump’s controversial visa ban order is likely to redirect many US-bound investments from the region towards Dubai. “Uncertainty about the recent executive orders issued by the US president will make investors wary of remaining invested in the US,” says Kalpesh Sampat, COO of SPF Realty. “It is one more big part of his uncertain and non-conventional policies, and investors do not like uncertainty at all. So I expect money from the GCC and South East Asian countries invested in the US to flow back to their respective home countries and in many cases, their adopted or second home.”
India’s demonetization
India is the biggest expat investor in Dubai property, with some 6,263 Indians investing Dh12 billion last year, according to the DLD. With Prime Minister Narendra Modi’s demonetization policy, Indian investments in Dubai property may surge further since the emirate offers attractive returns.
“The mid to long-term investors from India will reconsider whether investing in several properties in India remains a sound move financially, or should they consider buying one in Dubai, at least for their children, as they are allowed to repatriate $250,000 per family member per year,” says Sampat. “Following the demonetization, there can be even more measures that could adversely impact values of investments in India, specifically real estate holdings.”
Newer locations
Dubai residents and investors today have a choice to invest in newer areas, allowing them to select from communities that are centrally located, those that are more affordable or those that offer more flexible payment plans, says Ghanekar.
“The areas and communities that have witnessed significant momentum over the last year are Dubai Hills Estate, Mira Townhouses by Emaar, Town Square by Nshama, Dubai Creek Harbour and Dubai Properties’ Mudon, Serena and Villanova projects to name some,” says Ghanekar. “Developers have also readjusted their strategies making things easier for the end users to commit today. These initiatives include flexible payment plans, including post-handover schemes, full or partial waivers on the 4 per cent registration fee, waiver on service charges for a predetermined period and complimentary furniture package.”
Global volatility
Dubai real estate has attracted foreign investors from 136 nationalities, who collectively pumped in investments worth Dh44 billion last year. “There is no doubt the economic slowdown in the Middle East resulted primarily due to a major drop in oil prices,” says Ghanekar. “Dubai has managed to hold on to its status as a ‘safe investment haven’ and a cosmopolitan city that welcomes everyone. Every distress situation in the region has prompted an influx of funds and a boost in the overall investment, especially into the real estate sector.”
For instance, he points out that real estate investments in Dubai peaked in 2014 at the time of the crisis in Syria.
“[We still to watch out for the impact of] the current global affairs, primarily Brexit, the demonetization of Indian currency and US politics, and their influence on the outlook in the Middle East,” says Ghanekar. “If just a fraction of the total global investments were to be channelled to Dubai, this would have a huge positive impact on the market.”
High yields
“An annual, tax-free net rental return of 5-9 per cent is impressive by any standards,” says Ghanekar. “Furthermore, given the market is predicted to bottom out this year, investors will have access to some of the best properties in prime locations, and that would translate into an investment with a high capital growth potential.”
Attractive prices
The market has corrected itself during the last two years. Thus, with property rates softening a bit, there are far more attractive opportunities to purchase property in the present market than before. Ashraf Khan, director of Linkage Real Estate, says the market has become more mature, correcting by itself after nearly overheating in 2013-14.
“The more established areas such as the Palm Jumeirah, Downtown Dubai and Dubai Marina had seen a marginal decline in prices of around 5 per cent to a maximum of 10 per cent, whereas, surprisingly, second-tier or affordable areas such as Dubai Sports City and JVC have maintained their prices with hardly any drop,” says Khan. “The price range in Sports City and JVC is from Dh900-Dh1,050 per square foot. However, I believe if the prices for the new launches in new areas such as Arjan, Majan, Town Square and Dubai South would be around Dh750-Dh850 per square foot, with flexible or post-handover payment plan, it will further encourage first-time buyers.”
Dubai is also much more competitive than countries such as London, Hong Kong or Singapore. “Prices in Dubai on average range from Dh1,500-Dh3,000 per square foot in central and established upscale communities such as the Palm Jumeirah, Downtown, Dubai International Financial Centre, Emirates Living and Dubai Marina,” says Khan. “Whereas the prices in central and developed areas in London, Singapore and Hong Kong are almost twice or thrice of the price in Dubai. So, if you invest wisely in these areas, you will make good money.”
