Engel & Völkers Dubai’s CEO Matthew Bate analyses where Dubai’s real estate market is headed in 2018
Over the last few years, the Dubai property market has been a hotspot for investors from around the world, with the Dubai Land Department (DLD) recently releasing statistics that show that British real estate investment in Dubai amounted to more than $8.46bn over the last four years.
With foreign investors finding that the UAE real estate sector is a business-friendly landscape with low taxes and world-class infrastructure, the DLD has proposed a new mortgage and finance law which aims to bring more capital into the real estate market.
The main objective of the mortgage law is to attract foreign investors and public joint stock companies listed on Nasdaq, while it also aims to encourage alternative financing models, the DLD said. It also highlighted that the law would cater to investors with small and medium-sized portfolios.
Given these changes, Matthew Bate, CEO of Engel & Völkers Dubai analyses where the market is headed.
What percentage of foreign investors are attracted to the Dubai real estate market?
Recent industry reports have shown that foreign investments make up at least 20% of the emirate’s real estate market, demonstrating a significant share of the market as compared to the other countries within the region. The market share translates to around $41.1bn of investments made by international investors coming from the KSA, India and the UK, to name a few.
The strong preference exhibited by international investors has helped position Dubai as one of the world’s top cities attractive for foreign real estate investment – a feat that is accompanied by the strategic enhancements made to make real estate processes more transparent and faster. The growing preference towards Dubai’s real estate segment has also resulted in an upward trajectory that noticeably jumped during the second half of 2017, especially across the luxury real estate segment.
The Dubai Land Department has revealed that Indian investors accounted for over $5.55bn in sales value over the last 18 months, followed by Pakistani nationals with over $1.9bn invested from January of 2016 to June of last year.
One key driver to the segment’s growth can be seen in the continuous support received from both the private and public sectors, which in turn has helped in reinforcing the reputation of the emirate’s prime development projects in the international markets. The country’s wise leadership has implemented strategic programmes and initiatives that have earned the confidence and trust of foreign investors. The growth is expected to surge even further as we come closer to Dubai Expo 2020 and as other major developments are rolled out to help achieve the goals and objectives of UAE Vision 2030.
What is your assessment of the current situation of the real estate market, compared to 2017?
We are seeing increased preference for the local luxury segment, which is evident in the high number of transactions during the first quarter of the year across well-known luxury community development projects like Al Barari, Emirates Hills, Palm Jumeirah and Jumeirah Islands. In line with this, we are looking at a continuous increase in transactions within this segment, as more attractive opportunities are expected to be offered to investors in 2018.
Dubai’s real estate industry performed well in 2017, generating around $77.5bn from over 69,000 transactions. With the market still moving towards achieving more stability, experts forecast more enhancements to be made, which can further strengthen the emirate’s reputation as an industry leader.
As compared to the previous year, some developers are looking into reductions of the apartment sizes, while others are offering more affordable property prices and payment plans, or special and limited time discount schemes. In connection with this expected trend, transactions made by the middle-income segment are likely to keep strong throughout this year.
What is your assessment of VAT? Will it have an effect on the real estate market in terms of selling?
The implementation of VAT for property transactions is not expected to majorly affect the market, especially in terms of interest from foreign investors. Industry experts have explained that despite the introduction of VAT, the levied 5% still remains one of the lowest rates for value added taxing in the world. In addition, VAT being levied by one side and claimed in return by another party is not likely to leave a large impact on the buying market.
At Engel & Völkers, we understand that implementing VAT is common and also higher across other markets where we also operate in. We believe that the input and output of tax balances itself, hence leaving minimal effect on the projected growth of Dubai’s real estate market. This is widely evident in our recent performance reports, which show that March and April have been our best months so far and reflect that investors, both local and foreign, have accepted the implementation of VAT into the prices of today’s real estate offerings.