Prime Properties: Foreign buyers keen on Dubai

Demand for prime real estate in the emirate spikes after sustained demand from Indian, British, Saudi and Russian nationals

Even though rents and sales prices are flat in Dubai’s broader market and softening tendencies are expected to last throughout the year for the residential sector, demand for prime property seems to be healthy enough to continue outperforming the market.

Consultancy Knight Frank’s UAE Real Estate Mid-Market Review in June shows that prime property in Dubai has been outperforming the market average with prices rising by 2 per cent in the first quarter of 2016 over the fourth quarter of last year. 

Experts say that this has to do with controlled supply being kept in pace with demand, continued government infrastructure spending, strong or returning buying power from foreign property investors and the prospects of Dubai hosting the Expo 2020.

In terms of nationalities, the most active foreign buyers in the Dubai property market last year remained Indians, followed by citizens of the UK and Saudis, Dubai Land Department data reveals. While the share of Chinese and Russian buyers is comparably small, it is expected to rise as a result of a shift expected this year in the aftermath of the UK’s Brexit vote.

Russians are coming?

For example, Russian buyers with a budget of more than $1 million (Dh3.67 million) are looking at the UAE as a prospective market once again. According to Moscow-based real estate agency Tranio, the UAE is the most popular non-European country destination for Russians with such a large budget. 

In terms of cities, Dubai outranks even New York, Barcelona, Miami and London.

“Remarkably, many of these places have lower property prices than Moscow where a square metre costs $5,297 on average,” says Tranio property analyst Yulia Kozhevnikova in a recent study acquired by GN Focus, adding that “Dubai remains one of the cheapest cities for Russian buyers in our top ten list.”

However, despite demand picking up, Russian buyers still need to plan their budgets wisely.

“Based on our most recent requests, Dubai remains a sought-after investment destination [for Russians],” Daria Batiuk, Tranio’s Sales Manager in Dubai, tells GN Focus.  “However, our customers’ budgets have decreased significantly, mainly due to the rouble devaluation.

“A lot of our clients are looking to invest in rental properties now and the most popular are studios and small apartments. We also get a lot of enquiries for off-plan property. 

“The average budget for buy-to-let properties is anywhere between $110,000 and $450,000, compared to $1.24 million in 2014.” 

But this should improve over time, Tranio suggests.

“Dubai is still a much-appreciated overseas property investment destination, but the most significant change is that our investors have smaller budgets at this point of time,” says Bianca Jutaru, Tranio’s international spokesperson.

In turn, investment by Britons in the UAE will quite certainly dip in the future, notes Craig Plumb, Head of Research at JLL MENA, in the property firm’s Dubai Real Estate Market Review Q2 2016. “Overall, there is a slight probability of British investors being negatively impacted by the devaluation of the British pound following Britain’s decision to exit the EU,” he explains.

However, even if British real estate investment in the UAE takes a dive, it does so from a high level. Last year, Britons injected close to Dh11 billion in the local property market, almost as much as investors from Canada, Russia, China and the US together.

The leader

However, the property investment champions in the UAE remain Indians who mainly look for real estate in Dubai with Downtown Dubai and Dubai Marina being favoured addresses for apartments and Reem and Dubailand when buying villas, data from property portal Bayut.com reveals.

Indians in fact have been the largest non-Arab investors in the Dubai real estate market in terms of both value and volume since 2012. 

Over the past three years, Indians invested Dh44 billion here, Dubai Land Department data shows, of which Dh20 billion has been spent in 2015 alone in more than 8,700 transactions backed by a booming Indian economy.

“India is an enormous economic and demographic power at the global level, experiencing high growth rates that contribute to the rise of the middle-income group in the community,” Sultan Bin Butti Bin Mejren, Director-General of the Dubai Land Department said in a recent report.

“India and the UAE enjoy historical trade relations, and our data indicates that the Dubai property market is of high appeal to Indian investors who always top the foreign property investors list in the Dubai market, in terms of the number of transactions and gross total value,” he said.