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Inflation, Russian buyers and pent-up demand driving UAE’s property sector: Experts

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Global inflation, a flood of Russian investors and pent-up demand are driving booming property sales in Dubai, according to local real estate experts.

Amid geopolitical tensions and cost-of-living crises around the world, many investors are choosing Dubai as an attractive alternative to other metropolitan hubs, Abdullah Alajaji, founder of the UAE-based property brokerage Driven Properties, told Al Arabiya English.

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With inflation reaching its highest peak in up to 40 years across parts of the globe, investing in property in Dubai – where the price tag of homes is a “fraction” of comparable properties in major international hubs such as Singapore and London – is becoming a more appealing option, he said.

“If you look at London, Paris, New York and Tokyo and so on... the prices in Dubai are a fraction of prices of properties and we’ve seen now wealthy and affluent individuals coming in from Europe and Russia and so on and they look at prices in Dubai and they say, ‘Okay, well, this is this is relatively inexpensive, and I’m willing to deploy this capital.”

Other factors are driving overseas interest in Dubai’s property market, said Alajaji.

His firm, a member of Forbes Global Properties, an invitation-only consortium of leading luxury real estate firms, has seen a boom of interest from investors.

With inflation, commodity prices have soared pushing up the cost of building materials, meaning, globally, developers are finding it most costly to develop. This is set against a backdrop of weakened global currencies against the US dollar.

However, Alajaji said the UAE dirham has remained strong, with the cost of importing goods far cheaper compared to the global average, meaning local developers are not grappling with the same cost hikes.

High property yields

Meanwhile, property yields in Dubai remain extremely competitive when compared to other major urban cities.

Bvlgari Resort & Residences at Jumeirah Bay is a joint venture between Meraas Holdings and Bvlgari Hotels & Resorts (Supplied)
Bvlgari Resort & Residences at Jumeirah Bay is a joint venture between Meraas Holdings and Bvlgari Hotels & Resorts (Supplied)

“Dubai still offers the highest yields compared to the same global metropolises,” he said. “If you look at Singapore and Hong Kong and European cities such as Paris, for prime property, you’re looking at two and a half percent yield on your property. In Dubai, you can get upwards of five percent yield for one property.”

Risk perception of investing in Dubai property is also increasing year on year, according to Alajaji.
“I think the perception of risk has been looked at very, very carefully but now that you’ve seen a lot of Europeans coming in and looking for Dubai as a safer place to invest it makes the perception of Dubai as much less risky compared to other metropolis,” he said.

Russian buyers in UAE

Another factor driving the UAE’s property market is an influx of buyers from Russia amid the war with Ukraine.

“We’ve seen a plethora of demand coming from different nations but especially from Russia,” Alajaji said. “So, I think the inflation has been subdued in Dubai but at the same time has been replaced by significant demand still coming into the property sector.”

He continued, “In recent months there haven’t been many choices for Russians to make investments. They have had to make diversions away from places such as Europe because of sanctions and so on. So traditionally, where they would have had assets in places like London or Marbella or South of France, many are now looking to sell and swap such assets for places in Dubai.”

Aside from Russian investors, Dubai is also witnessing high demand from countries including, Kazakhstan and Uzbekistan.”

While Alajaji said “no one can time the market” when it comes to investing in real estate, he believes many should view Dubai properties as an attractive long-term investment.

Port De La Mer (PDLM) by Meraas Holdings is the first freehold community in Jumeirah, Dubai. (Supplied)
Port De La Mer (PDLM) by Meraas Holdings is the first freehold community in Jumeirah, Dubai. (Supplied)

“Investing in property has always, over a long period, brought in significant returns.”

Also speaking to Al Arabiya English, Ahmed al-Suwaidi, managing director of residential communities at Dubai Holding Asset Management, has reported increased interest in the UAE’s property market.

“Dubai offers a high quality of life with an eclectic housing spectrum from affordable to premium options,” he said. “Not to mention our ranking as one of the safest cities, a cosmopolitan ethos and world-class infrastructure, among many other benefits.”

He also said there are other factors driving the UAE’s real estate market – including the 2022 FIFA World Cup in Qatar – which will affect the emirate’s rental market, a rebound in investment after the COVID-19 pandemic, while a tweak of the visa rules has also seen an unprecedented spike in real estate demand.

In July 2022, the total real estate sales transactions jumped 61.7 percent higher than the July 2021 numbers and touched $5.45 billion (Dh20.8 billion).

“Dubai is expecting increased visitors during the second half of November, both due to winter being a prominent tourism season as well as for the highly anticipated FIFA World Cup, which means a myriad of opportunities for the real estate sector,” he said. “In terms of real estate and the housing sector, we expect to see an increasing demand for short-term rentals. Even during Expo 2020 Dubai, we saw similar activity in the sector, and while that event was longer and more localized, there were a lot of valuable learnings we can apply here.”

He also said, “hotels are likely to fill up with winter tourists, which will provide an incentive for people looking for quality accommodations to consider short-term rentals.”

“Also, following the global COVID-19 pandemic, the real estate sector is rebounding rapidly given the recent uptake in activities across both property rental and ownership landscapes,” al-Suwaidi continued.

“However, the future of the sector is evolving. Changes in how spaces are used and experienced, trends in design and construction as well as creative solutions will position the real estate market for the future – especially as developments in Remote Work Visas, Golden Visas and hybrid work trends impact people’s movements, behavior as well as investment prospects.”

Read more:

UAE real estate market continues to flourish in second quarter

Dubai to have 10,000 new villas, townhouses in two years: Real estate developer

Russian and CIS investors account for over 20 pct of potential homebuyers in Dubai

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