Dubai: Sure, investors are making a return to buying or renting luxury homes in Dubai – but they are doing so at a bargain.
These days, renting out a $10,000 a month luxury home will provide access to a 4,800 square feet home in Dubai. That’s against the 1,500 square feet a similar sum will fetch in Hong Kong – the world’s most expensive real estate market, according to the latest update from Knight Frank, the consultancy.
Just five or six years ago, $10,000 would have got only about 2,000 square feet in space in this city, but excess supply and subdued demand in the last two years had brought down rents.
Faisal Durrani, Head of Middle East Research at Knight Frank, said: “Concerted efforts by the government to stimulate economic activity and deliver one of the world’s leading vaccination rollout programmes has begun to instill confidence in the market, with average property values rising by 0.7 per cent during Q1-2021, the strongest rate of growth since the summer of 2016.
“It is worth noting however that luxury rents grew by 1.8 per cent during March 2021, the first increase in 12-months and the strongest rate of growth since October 2013, suggesting that the window for securing luxury “bargains” may be on the cusp of reversing.”
Familiarisation: Some prime tenants prefer to rent whilst familiarising themselves with the local market before choosing what and where to buy.
Positioning: In cities where primes prices are falling and are expected to do so in the short- to medium-term, some homeowners will opt to sell and rent enabling them to be a cash buyer once prices bottom out.
Prohibitive purchase taxes: Several markets have raised purchase, ownership and sales costs in recent years. Foreign buyers looking to purchase in markets such as Hong Kong and Singapore would have to pay between 15-20% in additional stamp duties on top of existing rates for domestic buyers, making renting a more attractive option.
But not all luxury real estate spaces are faring equally. Rents in prime central London and Manhattan both fell 14 per cent in the year to February, according to Knight Frank.
“The rate of rental declines is slowing and new lease signings are recovering in both markets,” the consultancy adds. “Motivated by large discounts, prime tenants are making their move back into some city centres hopeful of shorter commutes post the pandemic.
“Whilst domestic demand looks to be strengthening in some cities, the easing of travel restrictions will be the key determinant for the recovery of prime rental markets globally.”
And this is where Dubai is scoring…