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What are the UAE’s foreign investors looking for?

What are the UAE’s foreign investors looking for?

Gulf News, 17 October, 2018

As much as Dh30 billion of the Dh162 billion invested in Dubai real estate in the first half of the year came from overseas investors, statistics from the Dubai Land Department (DLD) show. But what are these foreign investors prioritising when searching for property to invest in Dubai? To be sure, location remains a key factor in their decision, so Dubai’s popular communities are top on a foreign investor’s list.

“They tend to buy properties in the favoured and iconic areas to attract tenants and high rental yields,” Lewis Allsopp, CEO of Allsopp & Allsopp, tells Property Weekly. “Views from the property can be enticing to investment buyers who are looking for prime real estate. A property with a Burj Khalifa view, for example, is always highly sought after.”

 

Other buyers will base their investment on improving infrastructure, such as an expanding tram line and proximity to the Al Maktoum International Airport, he adds.

An increasing number of overseas buyers are also searching for holiday homes as Dubai increasingly becomes a tourist haven, yet these buyers are also looking at yields and returns, Myles Bush, CEO of PH Real Estate, tells Property Weekly.

“Cash deposits sitting in European banks are returning tiny interest levels, while real estate in Dubai can allow investors to enjoy 9-10 per cent rental yields,” says Bush.

Types of investors

Laura Adams, cofounder and managing director of Carlton Real Estate, notes that most investors are looking for good payment plans and zero DLD charges in prominent developed communities and from reputable developers. When it comes to completed properties, many are looking for an 8 per cent return on residential units and 10-11 per cent on commercial units, she says.

And while factors such as location, infrastructure, accessibility to amenities and proximity to transportation links are all important for foreign investors, some have specific preferences.

According to Abdul Kadir Faizal, cofounder of real estate crowdfunding platform Smart Crowd, there are three types of foreign investors: those looking for high rental yield, lately of 8 per cent and above, those focused on long-term capital appreciation and those looking to settle in Dubai. Investors looking at high rental yields usually go for smaller unit types, preferable at a lower entry point. These properties also tend to have better transport connectivity within a developed community, which supports mid to long-term occupancy, says David Abood, partner at Core Savills.

While some investors look solely for rental yield and want immediate returns, Allsopp says most of his investor-clients look for capital appreciation and a long-term investment. “It’s very difficult to predict a property market over three to four years, however, it’s much easier to predict that over 10 to 15 years property markets will appreciate,” notes Allsopp.

For investors looking to settle in Dubai, they are more willing to pay a higher premium for better views — buying a house is more of an emotional decision to them, according to Faizal. Such investors are willing to wait for a longer completion date as they don’t have an urgent need to relocate. “That is why the recent decision to introduce a five-year visa for expat retirees is great for the property market,” says Faizal.

Iconic projects

Allsopp asserts that overseas buyers are attracted to much talked-about areas such as Downtown Dubai, Bluewaters Island, Dubai Marina and the Palm Jumeirah. “Investment buyers want properties that look onto the tallest building in the world, are on a man-made island and in locations well-known internationally,” he says. At the same time, there’s a growing demand for projects in urban waterfront areas, especially with the rapid construction and the new launches in Business Bay and along the Dubai Water Canal, according to Haseeb Mirza, data specialist at Reidin.

He says that relatively new locations such as Dubai Creek, Mohammad Bin Rashid (MBR) City and Dubailand have seen the greatest number of off-plan transactions in recent months.

Whereas Dubai Marina, International City and Dubailand have seen the largest volume of transactions in the ready market — mostly apartments offering average rental yields of around 7 per cent, Mirza reveals.

Meanwhile, an increasing number of European buyers from colder climates are opting for waterfront properties, with Palm Jumeirah being a long-time favourite. “Here, overseas buyers can find beautiful ocean views and access from Dh1 million for a smaller studio all the way to a sprawling seven-bedroom mansion for Dh70 million and beyond,” says Bush.

There’s also a preference among foreign investors for established developers. Such developers have more flexibility in providing incentives such post-payment plans and waiver of DLD registration fees, which many private developers cannot afford to do, says Bush.

Who’s buying?

There has been a recent upsurge in Chinese, Indian and UK investors, says Faizal. “The reason for this is due to Dubai being 25 per cent more affordable compared to similar options in their home countries.”

Ellington has observed this trend, reporting that Chinese customers are now among its top five customers. Since 2016, the Dubai-based developer has seen a 150 per cent increase in sales to Chinese buyers, prompting it to launch a platform in Mandarin and hire a Mandarin-speaking team.

Developers are also taking note of the trend. “Over the past two years, Chinese buyers have consistently ranked among Dubai Properties’ top 10 buyer nationalities in terms of value,” says Marwan Al Kindi, Dubai Properties’ director of sales, in a statement. “However, as recently as April, they were in the top five, so there is a clear trend for us to capitalise on.”

One of the biggest Chinese real estate investments in Dubai was announced in June by Fidu Properties, which revealed plans to invest Dh2 billion by the end of the year. The company has already signed deals worth Dh380 million with Emaar for residential and commercial spaces at the The Grand at Dubai Creek Harbour.