Traditionally, the United Arab Emirates (UAE) was not a likely destination for Chinese property investment – until it emerged as a regional hub for the Belt and Road Initiative (BRI).
According to a report by Savills, China spent US$71.1 billion in the Middle East between 2014 and 2017 as part of the BRI, and has pledged to invest a further US$10.7 billion by 2022 in Oman’s Special Economic Zone at Duqm.
Swapnil Pillai, associate director, research and advisory, at Savills Middle East, said the Middle East is an important Belt and Road partner because of its location at the crossroads of Asia, Africa and Europe and its strategic seaports.
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“The Gulf and North African regions have traditionally seen strong capital flows and investments from the US and Europe, however in the last few years, investment from private and public sector Chinese firms has increased substantially,” he said. “Chinese investments now play a significant role in developing and operating crucial infrastructure projects.”
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The BRI is in many ways complementing the existing and proposed infrastructure projects in the region, Pillai added. “While mostly targeted at upgrading infrastructure, the project is in line with the vast transformation plans of GCC (Gulf Cooperation Council) countries.”
By the end of last year, the UAE was the eighth most popular destination searched for on Chinese property portal juwai.com. Inquiries were up 43 per cent on the year before, but had quadrupled over a two-year basis, according to the company.
On LuxuryEstate.com, the emirate of Dubai is currently the 12th most searched destination by Chinese users following a 44 per cent increase in inquiries in 2020.
Aldo Rella, head of partnerships at LuxuryEstate.com, notes that the UAE government offers residency to foreigners who buy properties. “The duration of the visa is directly related to the property value,” he said. “Also, they have highly favourable tax conditions: there are no property taxes nor stamp duties, and this kind of benefit applies to all kinds of properties, even the most expensive.” Local authorities recently introduced a retirement visa, he added, and “that will probably contribute to boost the luxury property market in the next few years”.
In terms of buying power, Dubai is the world’s third most-affordable location for prime residential property. As of June 2020, the price of a luxury home in Dubai averaged US$560 per square foot: only Kuala Lumpur and Cape Town were cheaper, at US$270 and US$260 per sq ft respectively, according to Savills’ latest Prime Residential World Cities Index.
Pillai said that at this price Dubai “offers great value for international investors looking for investment-grade residential assets and relatively high yields compared to its global peers”.
Putting that into perspective, Lewis Allsopp, CEO of Allsopp & Allsopp, said a flat in the Burj Khalifa, the tallest tower in the world, can be bought for around US$410 per sq ft, compared with up to US$11,436 per sq ft for a prime residential address in London.
“Similar comparisons can also be drawn for other major cities around the world,” the Dubai-based real estate broker said. “Even if we accept that Dubai is still a growing force and not on a level with the likes of London yet, there is absolutely no reason that the difference should be that large. There is a golden opportunity to invest in Dubai at the moment, and the potential for future appreciation is significant.”
Andrew Cummings, co-founder and managing director of LuxuryProperty.com, makes another comparison. “If you were to spend US$1 million on a property, that would get you a very cosy 237 sq ft flat in Hong Kong or 312 sq ft in London. In Dubai, that same investment gets you a whopping 1,604 sq ft of prime real estate. If you are looking outside the luxury sector, the property sizes go up to about 3,025 sq ft.”
Allsopp believes Dubai’s Belt and Road status is one of the factors attracting Chinese investment. Dubai is also a forward thinking and technologically focused city, which is “safe, clean and friendly, and inclusive of all cultures and religions. On top of that, the financial centre is already the financial conduit between the East and West and it is currently under development to double in size”, he said.
Dubai offers great value for international investors looking for investment-grade residential assets and relatively high yields compared to its global peers
Allsopp concedes that Chinese investor activity was slowing even before the pandemic, a trend he puts down to a slowing in the launch of new projects from major developers, which saw a contraction in off-plan sales overall.
“Since the easing of lockdown in the UAE (in May), we’re seeing numbers increase again,” he said. “Our own data from August 2020 shows that transactions involving Chinese investors have risen by just under 50 per cent when compared to August 2019.”
Cummings agrees that in the months following the Covid-19 lockdown, Dubai’s luxury real estate has seen the most activity in recent years. While this has been fuelled by local buyers, given restrictions on global air travel, he’s seen a significant uptake in enquiries from overseas, including China.
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“Traditionally, Chinese buyers are more visible in the investment sector – off-plan units with reputable developers such as Emaar and Meraas. However, in recent months we have seen an increase in Chinese buyers and tenants looking at prime areas such as Emirates Hills and Al Barari.”
In the post-Covid-19 landscape, Cummings continues, the issue is lack of stock, driving price increases because buyers have moved so aggressively into specific areas. “District One, Palm Jumeirah, Dubai Hills, Al Barari – super-prime areas always have demand because people want to live there,” he said.
For a long-term investor, Emaar Beachfront, a collection of seafront flats on a man-made island, “is going to be sensational”, he added. “Super prime, it takes what already exists in Dubai but gives it a new contemporary flavour. For the ‘raw’ investor, newer communities such as Town Square and Mira Oasis offer low ticket value entries with high yield returns.”
What you can buy for 1.45 million dirham (US$395,000): A one-bedroom flat at Emaar Beachfront, a cluster of high-rise buildings enjoying views of Palm Jumeirah, Dubai Marina and the sea. Amenities include gyms, pool decks, retail and dining outlets on each building’s podium, and private beach access. The development will also feature its own marina, hotels, a shopping centre and the largest cruise terminal in the Middle East, as well as an architectural attraction known as the Dubai Lighthouse. Four-bedroom units cost 5.3 million dirhams (US$1.4 million).
What you can buy for 40.4 million dirham (US$11 million): A beachfront villa in uber-luxe condominium XXII Carat on the man-made island of Palm Jumeirah, Dubai. This private, gated enclave of 22 villas features a Tuscan facade with designer interiors, panoramas of Dubai Marina and exclusive beach access. Residents enjoy 24-hour concierge, security and valet parking service.
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