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Foreign investment results in improvement in Dubai property market

Monday 1st August 2016

Written by Roy Weatherby, The Overseas Investor

After several years of bad performance, the property market in Dubai is starting to grow as a result of investment from foreign investors. Government initiatives and excellent rental yield have helped give the sector a boost.
Through the first three months of 2016, high end properties helped increase average prices. Even though there is geopolitical unrest, Dubai is still seen as a safe place to invest because prices are low, mortgage rates are flexible and there are tax benefits.
The flurry of investment was a surprise to many especially as the economy slumped to its lowest point for five years. Around 21% of GDP consists of real estate and construction and during the last three months of 2015, buyer inquiries and transactions also dropped. However, the investment that has come from foreign buyers has certainly helped to boost the revenue generated by the real estate sector.
In terms of investment destinations, at the top is Dubai, Abu Dhabi and Sharjah. A survey showed that 27% of investors saw Dubai fall into their top three with 21% of people choosing Abu Dhabi and 8% selecting Sharjah.
The Dubai Land Department shows that GCC nationals invested the most in Dubai, reaching $11.9bn throughout the year. The survey highlights specific areas that investors favoured such as Bur Dubai, Deira, Jumeriah and The Springs.
British investors, invested the second largest amount in Dubai real estate, totaling £1,9bn and this shows that demand for quality real estate is from UK investors is high.
The rise in investment from British investment comes after the Dubai Property Show 2016 which was held in London and it is the ideal platform from which developers, based in the UAE can showcase their latest developments.
Rental yields are one of the most attractive aspects of the real estate market and this figure sits at around 7% which is high when compared to that of Hong Kong which has an average rental yield of around 2% and London with an average of 4%. In fact, some areas of Dubai can reach as much as 10%, particularly in areas such as The Palm Jumeirah and Anantara.
The rental market is healthy and this has helped the country to grow. Job creation is also growing and this means that many residents are choosing to rent as purchasing a property can take longer.
In 2009, Dubai was hit by the economic crash which saw the county borrow billions from neighbouring countries. Once Dubai started to turn things around, oil prices dropped and this caused them problems because although it does not produce huge amounts of crude, the oil markets in Abu Dhabi, Saudi Arabia, Qatar and Kuwait help to create economic activity, as these countries also suffered, it had a knock-on effect for Dubai.
Dubai has to put more faith in its property market if it is to prevent an economic downturn such as the one it experienced in 2009. Foreign investment will play a large part in its success but this will also help to enhance other sectors such as retail and tourism.
Relying on the property market brings with it added pressure because there are a number of other sectors that contribute to the GDP of the country. This shows that the property market and the way in which it grows are linked to other sectors. Dubai appeals to both businesses and expats and other countries in the area are not able to offer this.
For more information on investing in Dubai, please contact Hopwood House.

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Editorial Contact Details - Conor Shilling
0845 672 6000
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