Where do HNWIs invest

Where do HNWIs investRenoy Kundukulam

The UAE is one of the wealthiest emerging countries across the globe. A good economic situation and a high quality living appeals to a lot of expats and high-net-worth (HNW) overseas investors are studying the international markets with a keen interest to purchase property. Today, both Abu Dhabi and Dubai are popular destinations to invest in property.

The industry is currently witnessing an increasing demand from UAE residents: the working population looking to cut their rent and boost savings, and investors who find the rental yields of over 7 per cent an attractive alternative when compared with other fixed-income investments with strong capital appreciation possibilities.

Some of the key factors influencing this demand include the UAE government's commitment to spending on infrastructure and development projects, availability of more sophisticated investment-grade products such as schools and hospitals, more transparent processes and procedures and, most importantly, stronger growth projections until 2020 and beyond. On top of this, the UAE offers investors a taxfree environment, which means there is no income or property tax here.

According to an industry report by Wealth-X and Sotheby's International Realty, HNW individuals are spending millions of dirhams on Dubai's luxury properties because of the excellent value for their money they offer. Dubai has everything an ultra-wealthy investor may desire, including year-round sunshine, world-class shopping, international sporting events and a cosmopolitan lifestyle, and all this can be achieved for an investment as low as $300 (Dh1,101) per square foot in new upcoming locations to $1,200 in Downtown Dubai, which is more than three times lower than the average price of an apartment in London.

In general, a lot of demand is observed in the sub Dh4-million segment with estimates suggesting up to 83 per cent of the total sales in the second quarter being recorded in this segment.

Investor profile

The latest figures from the Dubai Land Department also show about 56,000 investors from 150 nationalities invested a total of Dh135 billion on Dubai real estate last year. Once again demand for Dubai property was strongest among Emiratis, who invested Dh20.6 billion. This was half the total investments from the GCC. Looking beyond the Middle East, it was investors from India, the UK and Pakistan who spent the most on real estate assets last year. Indians accounted for Dh20 billion worth of transactions, British buyers spent Dh10 billion, while Pakistanis invested Dh8 billion. The appetite for real estate from HNW clients across Africa is also high as the majority of them seek international diversification.


Given Dubai's position as one of the top global cities according to Knight Frank's Global Wealth Report, the emirate will continue attracting investments both regionally and globally. However, the outlook for the emirate depends on a number of factors, including continued volatility in oil prices, the US presidential elections in November and ongoing geopolitical tensions, which are likely to impact the behaviour of currencies, investor sentiment and property demand.

The UAE property market has witnessed volatility in the recent past. On the local levels, lower oil prices resulted in the revision of government budgets, expenditure realignment and removal of energy subsidies. Coupled with Brexit, or the UK's exit from the EU, regional uncertainties and a stronger US dollar, alternate offshore property investments look even more attractive, luring investors to move part of their portfolios to overseas markets.

The Dubai residential market recorded a 5 per cent deceleration in sales and a 3 per cent decline in rentals year-on-year during the second quarter, as per JLL's Dubai Real Estate Market Overview. This indicates that investors are possibly either waiting on the sidelines or exploring investment opportunities elsewhere.

However, with new real estate projects such as IMG Worlds of Adventure, Dubai Water Canal, Dubai Parks and Resorts, Night Safari and other infrastructure developments leading to the Expo, investors will have a much stronger motivation to benefit from current valuations.

Why invest in property?

As one of the major asset classes, property remains indispensable to a well diversified portfolio. From an investor's point of view, property can be split broadly into residential, commercial, industrial and retail. It can also be directly owned, like most residential property, or indirectly owned through a managed fund, a syndicate structure or a real estate investment trust (Reit). All classes of property are valuable for diversification because property returns tend to move independently of other major asset classes, such as shares and cash.

Additionally, both residential and direct property have a low or negative correlation with other asset classes, providing excellent portfolio diversification benefits. Aside from that, rental income from the property can provide an alternate means of earning and serve as a substitute for a pension plan.

The right range of portfolio could be anywhere from 5-30 per cent. Picking the right amount requires a good understanding of the individual's personal circumstances, financial goals, risk tolerance and need for liquidity.

Property is a long-term investment and does not rely on property prices rising straight away. The longer an investor can afford to commit to a property the better. As investors build up equity, they can consider purchasing their next investment property and find the right balance between financial stability and still being able to enjoy life.

Finally, it's important to remain aware that unlike shares or managed funds, you can't just sell part of your investment in property if you need money. In short, be cautious, but consider that record migration levels and a rental property shortage are crucial factors favouring investing in property.

Find out the many ways to own a home

Source: Renoy Kundukulam, Special to Property WeeklyPW

The author is Head of Priority Banking at Noor Bank


For Rent


View more properties

For Sale


View more properties