Dubai developers target UK investors amid Brexit volatility

A remote property management system announced by the Dubai government is expected to reassure overseas investors. The Mashrooi system includes a dedicated judicial authority to regulate the emirate’s property sector. (Shutterstock)
Updated 19 November 2018
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Dubai developers target UK investors amid Brexit volatility

  • Some Dubai developers, which have experienced their own property slowdown over the last four years, see UK property weakness and sterling volatility as a potential sales opportunity
  • House prices across the UK are rising at the slowest annual pace since 2013

LONDON: Dubai developers are targeting UK investors as Brexit shakes confidence in British bricks and mortar.

The Dubai Property Show (DPS) kicked off on Friday at London’s Olympia Exhibition Centre amid a Brexit-fueled political storm and attempts to unseat Prime Minister Theresa May by politicians from her own party.

House prices across the UK are rising at the slowest annual pace since 2013 according to data from Nationwide published earlier this month, with fresh concerns emerging over what a no-deal Brexit would mean for UK property values.

Some Dubai developers, which have experienced their own property slowdown over the last four years, see UK property weakness and sterling volatility as a potential sales opportunity.

Samir Jalali was among the visitors to the London event, looking for potential investments for a client, one of the world’s largest rice dealers.

They were interested in “signature” properties, he said, adding: “Dubai is still one of those desirable destinations. This is a good time and opportunity to acquire property for a year or two.”

At the Hera Tower stand, business was brisk.

“Lots of inquiries, but no, nobody has bought yet,” said one of the young women buttonholing the passers-by. 

The development overlooking the canal near Dubai Sports City is three-quarters built and is due to be completed in June. Prices vary from £78,892 ($101,193) for a studio to £155,523 for a two-bedroom apartment, and the company claims to guarantee returns of at least 6 percent on rental.

The British are regularly among the top three investor groups from outside the Middle East. 

Aqil Kazim, chief commercial officer of Nakheel, the developer behind Dubai’s famous Palm Islands, said the company had 2,530 British investors who have spent £1.3 billion on property.

“The momentum is still there for innovative projects like ours. With currency shifts against the dollar, Dubai can be a positive alternative, a reliable place to invest.”

That optimism is reinforced by the Dubai government’s announcement of Mashrooi — a remote property management system, complete with its own dedicated judicial authority to regulate the property sector, aimed at reassuring overseas investors. 

The move should make foreigners more confident about buying property in Dubai, said Kazim.

“It means owners from overseas don’t even have to be in Dubai to manage their property. Tenancy disputes will be dealt with within a dedicated judicial and legal system instead of taking forever through the ordinary courts,” said Kazim. “It makes the rental property sector very transparent. Nakheel certainly welcomes it as being of benefit.”

The introduction of Mashrooi was announced in the emirate last week. Tala Khalifa Al-Suwaidi, of the Dubai Land Department, said Mashrooi was due to come into operation in the first quarter of next year. 

“It is all absolutely secure legally because this comes from the government of Dubai, ” he told Arab News. “Everything any investor wants to know about buying and managing property in Dubai, he can find out through Mashrooi, which means the information will be coming from the government of Dubai.”

Nakheel currently has £12 billion worth of property for sale, ranging from high-end luxury homes to “stylish, functional” accommodation for lower budgets.

Apartments in the 52-story Palm Tower (with an infinity pool on the 50th floor and views over the whole Palm complex) start at £345,000 for a studio. The tower is due to be completed in late 2019.

Nick Sajid, director of Invest Property, was also shopping for clients at the DPS and making contacts.

“Dubai is a global destination. It has the panache that London had until values got too high,” he said. The property market had also “matured” a great deal in the past 15 years.

“It used to be that everything was in the hands of just a couple of names. It was oligopolistic. Now there is balance in competition and the prices have been corrected. It is a safe bet,” he said.


Dubai real estate market recovery to be seen as of 2022: S&P

Updated 20 February 2019
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Dubai real estate market recovery to be seen as of 2022: S&P

  • The outlook on property was part of a challenging assessment of the credit-worthiness of the emirate
  • S&P was generally comfortable with the credit ratings of the emirate’s banking system

DUBAI: S&P Global, the ratings agency, painted a grim picture for the real estate sector in Dubai, with a meaningful recovery in property prices expected only after 2022.
At a presentation to journalists in the Dubai International Financial Center, S&P analyst Sapna Jagtiani said that under the firm’s “base case scenario,” the Dubai real estate market would fall by between 5 and 10 percent this year, roughly the same as the fall in 2018, which would bring property prices to the levels seen at the bottom of the last cycle in 2010, in the aftermath of the global financial crisis.
“On the real estate side we continue to have a very grim view of the market. While we expect prices to broadly stabilize in 2020, we don’t see a meaningful recovery in 2021. Relative to the previous recovery cycle, we believe it will take longer time for prices to display a meaningful recovery,” she said.
S&P’s verdict adds to several recent pessimistic assessments of the Dubai real estate market. Jagtiani said that conditions in the other big UAE property market, in Abu Dhabi, were not as negative, because “Abu Dhabi never did ramp up as much in 2014 and 2015 as Dubai.” S&P does not rate developers in the capital.
She added that a “stress scenario” could arise if government and royal family related developers — such as Emaar Properties, Meraas, Dubai Properties and Nakheel — which have attractive land banks and economies of scale, continue to launch new developments.
“In such a scenario, we think residential real estate prices could decline by 10-15 percent in 2019 and a further 5-10 percent in 2020. In this case, we expect no upside for Dubai residential real estate prices in 2021, as we expect it will take a while for the market to absorb oversupply,” she said.
S&P recently downgraded Damac, one of the biggest Dubai-based developers, to BB- rating, on weak market prospects.
However, Jagtiani said that, despite the “significant oversupply” from existing projects, several factors should held stabilize the market: Few, if any, major product launches; improved affordability and “bargain hunting” by bulk buyers; and a resurgence of Asian, especially Chinese, investor interest in the market.
Jagtiani also said that government measures such as new ownership and visa regulations and reduction in government fees could help prevent prices falling more sharply, as well as “increased economic activity related to Dubai Expo 2020, which is expected to attract about 25 million visitors to the emirate.”
The outlook on property was part of a challenging assessment of the credit-worthiness of the emirate. “In our view, credit conditions deteriorated in Dubai in 2018, reducing the government’s ability to provide extraordinary financial support to its government related entities (GREs) if needed,” S&P said in a report. “The negative outlook on Dubai Electricity and Water
Authority (DEWA) partly reflects our concern that a real estate downturn beyond our base case could out increased pressure on government finances,” the report said.
It pointed out that about 70 percent of government revenues come from non-tax sources, including land transfer and mortgage registration fees, as well as charges for housing and municipality liabilities, as well as dividends from real estate developers it controls, like Emaar and Nakheel.
S&P was generally comfortable with the credit ratings of the emirate’s banking system, which has an estimated 20 percent exposure to real estate. “Banks in the UAE tend to generally display a good level of profitability and capitalization, giving them a good margin to absorb a moderate increase in risks,” the report said.