Dubai: Investors from India and Pakistan do not seem to be put off by a strong dollar when it comes to snapping up property assets in Dubai. In fact, recent data suggest that each time dollar sets off on an upward trek, that’s when these buyers get in.
And the data also goes against conventional wisdom that suggests they should be better off holding back on such overseas acquisitions. And that’s because their weaker currencies mean they will have to pay more to the buck.
Instead, during “periods in which the Pakistani rupee has devalued, we have seen a greater influx of capital into the Dubai real estate market, as investor begin to hedge themselves against the strengthening dollar,” states a new report from Reidin-GCP.
“Similarly, there’s a high positive correlation between Indian investment flows and the movements in dollar-rupee. Similar to Pakistan, a stable rupee has actually led to a moderation of inflows, and the correlation implies that as the rupee depreciates, money flows actually increase.”
Since 2016, the Indian rupee has appreciated 1.3 per cent against the dollar (though it comes after a particularly turbulent phase before that), while the dollar appreciated by 0.4 per cent against the Pakistan rupee and 14 per cent against the pound (of course, helped along by the Brexit “Yes” vote).
For the moment, Indian fund inflow into Dubai property has taken a bit of a hit, brought on by the demonetisation drive since November 8. It could be weeks before some measure of stability starts to reassert itself.
It was the same with Pakistani investor interest in Dubai realty during the last two quarters of 2016. “We opine this decrease is attributed to the stable rupee against the dollar, along with the recent asset boom of the local Pakistani market (equities and real estate),” states the report.
But any currency depreciation could set off a fresh spike in money flows into Dubai real estate. (The IMF has suggested the rupee could devalue by 15-20 per cent.) But, if the past is any indication, these investors are likely to take the longer term view on currency movements and how those might have a say on investment decisions related to buying property here.
“Where depreciation of the currency is taken for granted over time, a strengthening of the dollar actually triggers greater inflows into Dubai,” said Sameer Lakhani, Managing Director of Global Capital Partners. “You also witness differing correlations over a longer time frame. This indicates currency fluctuations do not have much of an impact on investment decisions over time … rather investors tend to focus on underlying fundamentals.”
But the Brits prefer to do it their way
If currency weakness prompted Indian and Pakistani investors to head for Dubai property, a pound’s decline often has British buyers to stay put. “As the pound gets weaker, capital flows in Dubai begin to decrease as investors take advantage of the weak sterling in order to purchase assets in London and Britain,” states the Reidin-GCP report. “The recent devaluation of the sterling along with Brexit has created an opportunity in London for investors to capitalise on.”