Dubai driven by international investors

Invest in DubaiMartin Cooper

More than 90 per cent of Dubai’s population of 2.4 million people are foreign nationals, making it one of the most global cities on the planet. The emirate is also an established global tourism destination. According to MasterCard’s 2015 Global Destination Cities Index, it is forecast to attract 5.7 international overnight visitors per city resident in 2015, placing it in a league of its own. These dynamics have a direct bearing on the Dubai’s real estate performance and its future prospects.

Data from the Dubai Land Department show that real estate transactions in the emirate in the first quarter of this year numbered more than 11,600 and were in excess of Dh64 billion. The data also show that a wide range of nationalities invest in the Dubai market.

Investments by Emirati nationals comprised around 9 per cent (Dh5.8 billion) of the total real estate transactions in Dubai during the quarter, followed by Indians (5 per cent or Dh3 billion), Saudis (3 per cent or Dh1.9 billion), UK nationals (3 per cent or Dh1.9 billion) and Pakistanis (2 per cent or Dh1.4 billion). Other key investors included Iranians (Dh633 million), Qataris (Dh522 million), Russians (Dh509 million) and Kuwaitis (Dh500 million).

Location is prime

Several residential transactions in Dubai are driven by international investors, as opposed to resident and expat primary end users. This global dynamic has driven demand for established residential locations in the city, such as Downtown Dubai, Dubai Marina and Palm Jumeirah. International investors have also been chasing yields in less established areas of the city and this is reflected in the sales price performance of Dubai’s residential sub-markets.

Data from Reidin show that between the first and fourth quarters of 2014, Dubai’s residential submarkets achieving the highest levels of sales growth included International City (33 per cent) and Jumeirah Lakes Towers (17 per cent). The data also reflect that the traditionally more secondary residential sub-markets have been relatively well insulated from the recent decline in residential sales prices in Dubai.

For example, during the period between the second quarters of 2014 and 2015, sales prices in International City and Jumeirah Lakes Towers have remained broadly stable, while the majority of other residential sub-markets in Dubai have registered a decline of 5-10 per cent.

Tapping tourism

Dubai’s status as an established global tourism destination also has a direct bearing on the city’s real estate market. Dubai was ranked fourth in the Master-Card index, behind London, Bangkok and Paris. With a forecast of 14.3 million international overnight visitors for this year, Dubai is on track to achieve its target of 20 million visitors by 2020.

Data from the index show that Dubai leads in the world in terms of international visitor spending per city resident, forecast at $4,668 (about Dh17,146) in 2015. The emirate’s top five feeder cities are Doha, London, Kuwait, Muscat and Jeddah. Visitors from these five cities are forecast to contribute spends of $3.3 billion in 2015 (28 per cent of the $11.7 billion visitor spending forecast for Dubai in 2015).

Strong growth in visitor numbers to Dubai has led to a significant growth in the city’s hotel market. Room supply grew at a compound annual growth rate (CAGR) of 9.4 per cent between 2008 and 2014, and demand over the same period had a CAGR of 9 per cent. Annual growth rates have been generally lower in recent years than in 2010 and 2011.

By the end of last year, the Dubai Department of Tourism and Commerce Marketing estimated that there were approximately 67,500 hotel rooms in Dubai. Data from STR Global suggest that in 2014, Dubai had one of the highest revenue per available room rates in the GCC, at $190. This was a function of high average occupancies (79 per cent) and average daily rate of $242. These performance metrics reflect the fact that Dubai’s hospitality market has a large number of luxurious and upscale offerings, driven by high levels of spending per visitor.

There are, however, moves to diversify Dubai’s hospitality market and widen the provision in the city’s mid-scale hotel segment to facilitate visitors from global markets. The changing nature of visitors to Dubai continues to have an impact on the city’s skyline.

Source: Martin Cooper, Director and leads Real Estate Consulting for Deloitte’s Financial Advisory Services team across the Mena

Al Nisr Publishing accepts no liability for the views or opinions expressed in this column, or for the consequences of any actions taken on the basis of the information provided.


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