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The London residential property market developed over hundreds of years. It has been built upon a foundation of legal structure that can be traced back to the Romans, stringent financial controls and the timeless amenities and culture of the UK"s capital city. It is for these reasons that it is currently one of the world's most sought-after residential markets.
The Dubai residential market has only started to see significant development over the past 12 years, when foreigners outside the GCC were allowed to own property. Compared to London, the legal and financial protocols governing UAE real estate can be seen as less robust.
While Dubai's residential market may not have the same established history as that of London, the emirate certainly benefits from a thriving economy. Similar to London, Dubai's property market is flourishing at levels comparable to those experienced before the global financial crisis.
The connection between the Dubai and London residential markets is found in their relative safety. When buying a London residence, you are not just investing in bricks and mortar, you are also protecting your money from many of the vagaries and inconsistencies associated with the wider market. London can be seen as a relative safe haven from financial troubles in Europe and beyond that can still cause troubles in the coming year or two.
Viabilty of Dubai
Dubai similarly represents a relatively safe investment haven in the Middle East. The protection it provides from the political unrest in other parts of the region in recent years makes it a viable option for residential property investment.
But why residential property? It's all about speed and simplicity. A residential property transaction in Dubai can be completed in as short a period as a week. Most who have an inkling to invest will have a clear view of what makes a desirable home and will be familiar with the fundamentals of how a residential tenants occupancy agreement works.
This contrasts favourably with some of the acquisition and leasing strictures associated with the acquisition and letting of commercial property. Real estate terminology such as tenant's covenants, dilapidations, full repairing and insurance leases can sound complex and potentially off-putting to a prospective one-off investor.
Furthermore, should the economy worsen, a residential property investor can always take comfort in the knowledge that, while there will be fewer Prime central London sales index businesses taking up commercial space, there will always be demand for housing.
Do London and Dubai offer comparable levels of investment safety? For the reasons already highlighted, London offers a level of investment safety on a global scale, as opposed to that offered by Dubai. Knight Frank's Prime Central London Rental Index states that gross residential yield returns in prime central London are 2.84 per cent as of February and total returns average 10.6 per cent during the year to date.
The Dubai market can expect gross yield returns of between 4 per cent and 6 per cent. Using the economic principle of a higher yield implying a higher risk, a London investment could be seen as the steadier option.
Looking ahead, the latest Knight Frank Dubai Residential Review highlights a cooling in the Dubai market with first-quarter prices increasing at a lower rate of just 1 per cent versus a 4 per cent average quarterly growth last year.
Knight Frank's UK Housing Market Forecast states that prime central London could see growth of 20 per cent from this year to 2018. However. in recent months, price sensitivity has been felt at the top end of the market. Properties below £2 million (Dh12.32 million) are selling quickly and sealed bids are prevalent.
In conclusion, whatever criteria a property investor is looking to fulfil, there will be many properties that meet those needs across the two locations.
Click on Dubai Property Show which is set to give more than eight million Londoners a chance to explore real estate opportunities in the UAE
Source: Henry Faun, special to Property Weekly
The Writer is a Chartered Surveyor at Knight Frank, specialising In the Middle Eastern and UK real estate markets.