Question: I’m based overseas and given the current geopolitical uncertainty, I’m wondering if buyers like me are now the first to pull back. Is foreign money still coming in, or are international investors quietly stepping away from Dubai? ML, Hong Kong
Answer: I have to say that foreign money is still coming in, but I would not say it is coming in with the same ease or the same confidence it had before the conflict. Dubai Land Department’s first-quarter statistics still show strong foreign investment value at Dh148.35 billion ($40.39 billion), which is up 26 per cent year-on-year. That is a big number in any year, not least when the market is somewhat challenging.
At the same time, it was reported that some investors and advisers are looking at alternatives such as Singapore or some other countries as the conflict somewhat clouded the Gulf’s image as a safe place to hold assets. But that does not mean there is a stampede for the exit. It means foreign capital is behaving more carefully, which is perfectly logical. International money can be brave, but it is rarely sentimental. If it senses an easier, safer or simpler option elsewhere, some of it will pause or diversify into other areas.
My own view is that Dubai is not being abandoned, far from it. But it is being re-evaluated, and that is an important difference. Dubai and the wider UAE, in general, still offers things many places do not such as the tax advantages, strong infrastructure, decent regulation, forward thinking leadership, global connectivity and an established property market. But today, overseas buyers are more discerning and also cautious. They want more reassurance, more value and more reason to act now rather than later. That is a tougher environment, but not a broken one. Dubai has shown that it has surpassed situations that has affected it before. The market will need a little time to rebuild but rebuild it will.
Q: I watch the Dubai property market from afar. I have been thinking about investing in Dubai for a while and believe that the time might be right for an opportunity to finally step in. What's your opinion on the current sale prices, are they likely to drop if given the current situation, or has there has been a shift from a seller's to a buyer's market? LJ, UK
A: There is already some price movement in parts of the market. We have seen evidence that some sellers were cutting asking prices by around 12 per cent to 15 per cent to secure quick deals as the conflict unsettled the sentiment. So the idea that prices are steady is not quite telling the correct facts. We do, however, need to be pragmatic. A few anxious sellers do not automatically mean the whole market has repriced.
Dubai is not the market moving one way, nor for that matter are the other emirates in the UAE. There are many owners with no urgency or motivation to sell, especially in prime areas or in fully paid up property but of course there are owners who need liquidity or who no longer can ride out the risk. These two groups behave very differently. That is why headlines about the market can sometimes send out the wrong message. What we are seeing so far is more pressure on volumes and confidence rather than a wider based collapse in prices.
With tensions easing, the market may recover faster than many expect because the underlying appeal of Dubai and the UAE in general has not vanished, and certainly, the fundamentals which got us to where we were before February 28, when the Iran war started, still remain intact. So I would caution on dramatic language on both sides. The UAE real estate market is clearly not immune to bad news, but neither is it one that just falls apart because sentiment turns gloomy for a period of time.
The opinions expressed do not constitute legal advice and are provided for information only. Please send any questions to mario@evadxb.com
