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The latest data released by Dubai Land Depart (DLD) brings no surprises as the same nationalities have once again topped the list of Dubai's biggest foreign investors, excluding GCC citizens. India claimed the top position followed by the UK and Pakistan, as the three collectively invested Dh20.8 billion in the first six months of the year.
Dubai's geographical proximity to south-eastern countries has historically encouraged trade and cultural exchanges, but Indians and Pakistanis, in particular, have always found the emirate a very attractive destination for living and investment. They collectively constitute the largest part of the UAE's population — a central factor behind making them leading foreign investors in Dubai's property market.
''Indians and Pakistanis remain historically key investors in Dubai since the opening of property market for expatriate,'' says Mansoor Ahmed, Director of Development Solutions at Colliers International. ''Even if there is a slowdown in the property sector, we expect Indians and Pakistanis to remain key investors as their spending is not just based on price appreciation, but also other factors such as hedging against currency depreciation, diversification and law and order conditions in their native countries, especially in the case of Pakistan.''
Although Emiratis are still the biggest spenders with Dh12 billion in investments in the first half of the year, foreign nationals, especially from South Asia and the UK, have always ploughed heavily in Dubai's property market, thanks to exciting investment opportunities and high returns. The current year isn't any different.
The interest level of Indians, Pakistanis and British for Dubai's property market could also be assessed from the participation patterns at the region's biggest property show, Cityscape Global.
''Traditionally, these countries are indeed in our top ten, representing the largest groups of overseas visitors, which also include visitors from Saudi Arabia, Russia and Iran,'' says Wouter Molman, Director of Cityscape Group. ''Though there may be some changes in the order, we generally see a similar pattern every year.''
Analysts say the key factors that make Dubai lucrative for foreign investors are its tax-free and safe haven status, high rental yields, improving regulations and investor protection mechanisms. Foreign investors are especially more inclined to build their portfolios in Dubai to avoid the high taxes in their respective countries.
''Their taxing system is high, especially in India, but any money earned from buying and selling here is not liable to tax,'' says Mario Volpi, Managing Director of Prestige Real Estate, adding that the ease of doing business is another appealing factor for investors to come to Dubai.
The high-quality infrastructure and good living standards are also critical factors that encourage many expats to choose the city as a second home. Also, Dubai being an open market permits foreigners to purchase freehold land in many locations, unlike other markets in the region where the areas open for foreign investment are much more limited.
Top tourist destination
''Dubai has a more open economy and has attracted far higher levels of expatriate residents than neighbouring countries. Many of these expats invest in real estate,'' says Craig Plumb, Head of Research — Middle East and North Africa (Mena) at JLL.
With more than 12 million tourists last year, Dubai attracts far more tourists than other Mena markets. ''This has resulted in many visitors purchasing a second home or a holiday home for their family in Dubai,'' says Plumb.
Despite the recent market crash still fresh in people's minds, there has been heightened investor interest in Dubai's property market in the past three years. The proactive government measures to prevent the market from overheating have helped reinforce market confidence.
''All these measures and more have helped bring back confidence to the property market,'' says Volpi. ''Add to the mix the World Expo 2020 in Dubai and all the infrastructure that goes along with it, and you can see why confidence has returned.''
According to JLL, residential prices in Dubai increased by 56 per cent over the past two years, with rents up an average of 41 per cent. Property consultant Knight Frank agrees, noting that prices are now not far from their peak levels in 2008.
''In some areas we have even seen record prices achieved for one-of-a-kind properties coming onto the market,'' says Victoria Garrett, Associate Partner — UAE Residential at Knight Frank, adding that these prices are already above their peak levels in 2008.
Contrary to expectations, Dubai's recovery was swift and many attribute this to a series of measures by the government to increase transparency in the market.
''Moves towards creating and maintaining a transparent investor environment in which all parties are protected are a key confidence driver,'' says John Stevens, Managing Director of real estate services firm Asteco. ''The announcement last year of a new mortgage law and the proposed mortgage cap was an important factor in securing investor confidence.''
Stevens says Dubai's successful bid to host the World Expo boosted the emirate's profile, as this resulted in an infrastructure investment pipeline worth around $7 billion (Dh25.7 billion), which has been an important factor in boosting the economy.
Robin Teh, Country Manager — UAE at Chestertons Mena, says, ''All indicators such as GDP growth, credit lending and consumer confidence have been positively growing, thereby building investor confidence. Furthermore, property prices had fallen much below their fair values during the crash, which was another key attraction for investors looking at capital appreciation.''
Other factors contributing to the development of the Dubai real estate market in recent years include the positive economic growth, which is projected at around 5.5 per cent annually for the remainder of the decade, population growth with around 100,000 residents added annually, and increasing tourist arrivals as the emirate remains on track to reach its target of 20 million tourists by 2020.
Read on how Dubai is a mature market full of opportunities
Source: Syed Ameen Kade, Special to Property Weekly