Despite oil slump, Dubai sees surge in property investments from Saudis

Saudi Arabian investors’ interest in Dubai property isn’t new, but their investment appetite for Dubai property appears to have further increased in recent years. Although there has been a general slowdown in the past few months, Saudis remain Dubai’s second-largest investors among GCC nationals.
According to the Dubai Land Department, Saudis have invested more than Dh4 billion in the first six months of last year, compared to Dh3.1 billion during the same period in 2015.

Industry experts attribute the increase to a number of factors, including Dubai’s safe-haven status, investor-friendly policies and transparency. Dubai also has a much wider range of good-quality projects than any other market in the region. Furthermore, the emirate is attractive to Saudis because of the similarity in cultural and social values.

Craig Plumb, head of research at JLL Middle East and North Africa, says it is not surprising that Dubai has attracted significant levels of investment from the GCC’s largest economy.

“A number of reasons can be identified for the popularity of Dubai for Saudi investors,” he says. “These include the capital growth that has been achieved over recent years, the wider range of properties available in Dubai and limitations on the ability to buy off-plan projects at home.”
Martin Cooper, director, real estate, Deloitte Corporate Finance Limited, Middle East, says the high level of liquidity is a driving force behind the demand for Dubai property from Saudi nationals. “For example, many Saudis have historically not needed to debt finance residential real estate acquisitions in Dubai,” says Cooper, adding that a desire to diversify investment beyond the domestic market has also been a key driver for Saudis investing in Dubai real estate.

Dubai is also relatively close to home for Saudi investors, which makes it easy to monitor and visit their properties, says Plumb. Another attraction for Saudi buyers is the stability of the currency. “Unlike investors from Russia, India or the UK, which have been hit by the appreciation of the US dollar over recent years, Saudi investors have benefited from currency stability between the UAE dirham and the Saudi riyal,” explains Plumb.
Dima Isshak, head of research and advisory and valuations at Chestertons, says real estate prices in Dubai remain affordable in comparison to other cities popular with Saudi nationals such as London. “Additionally, political stability and safety, which Dubai and the UAE, in general, have been able to maintain, is a major factor in investment-making decisions,” says Isshak, adding that privacy and larger unit sizes are some of the key characteristics that attract Saudi buyers. Chestertons claims to have sold properties worth almost Dh232 million in the UAE in 2015, with almost 40 per cent of the total sales from Middle East investors. The company says Emiratis were their top investors, but a significant chunk came from Saudi Arabia, Jordan and Lebanon.

Building for Saudis
The recently concluded Cityscape Jeddah, which attracted a large number of exhibitors from Dubai, is another testimony to the importance of Saudi market. Abdulaziz Bukhatir, executive director of corporate services at Jumeirah Golf Estates, which sent a delegation of senior executives to the realty expo, says Saudis are increasingly attracted to Dubai’s transparent and robust regulatory framework that protects buyer rights and maximises returns.
“With Saudi Arabia holding its spot as the second-largest GCC investor group in Dubai real estate, after the UAE, we see major potential to market our villas, apartment and town houses across Saudi Arabia,” says Bukhatir. “We look to build partnerships in the market with leading local financial institutions and real estate agencies eager to partner with a world-class and award-winning residential golf community.”
Okbah Abdulkarim, chief operating officer of Artar Real Estate, which showcased its 36-storey residential tower, Mada Residences in Downtown Dubai, at Cityscape Jeddah, says enquiries from Saudi Arabia have significantly increased.

“We found that there is a strong interest from Jeddah investors in general, and that the prime project location and early delivery were often cited as primary motivators,” says Abdulkarim. “I believe this has also been reflected in figures issued by the Dubai Land Department.
Plumb of JLL agrees there is more interest in marketing Dubai-based projects in Saudi than in previous years. “A good example of this was the recent Cityscape Jeddah exhibition, where there were more projects on display from Dubai than for within Saudi Arabia itself.”

He says this is a reflection of the increased competition among developers who are having to try harder to attract overseas buyers in US dollar-denominated markets. “This is also partly a result of the restrictions on selling off-plan property within Saudi Arabia,” Plumb adds. But the oil price dip, which has delivered a major blow to the economy in Saudi, also has an impact on Dubai real estate. Cooper says low oil prices have contributed to recent softening of residential sales values and decline in transaction volumes in Dubai. “Perhaps as important, persistent low oil prices have also led to a dip in regional investor confidence,” says Cooper.

Abdulkarim, however, says his firm has not seen a drop in enquiries as a result of the oil price slump. He says in some cases buyers are citing the current situation in Saudi as motivation to invest in Dubai. “Saudi buyers feel Dubai will outperform the Saudi property market in sustained low oil price conditions due its more diversified economy and large mega projects due to be completed,” says Abdulkarim.
The industry observers point out that the Saudi government is taking steps under the National Transformation Plan to adjust, diversify and prepare the economy for sustained low oil prices. Bukhatir expects the diversification trend to funnel deeper into investors’ personal portfolio management strategies, which may positively impact their interest in properties across
the region.

“We anticipate the most traction in targeting this group through dealing with locally influential bodies with direct access on the ground,” says Bukhatir. “We will constantly evaluate this strategy and adapt our tact to ensure we leverage the sustained appetite for Dubai property in Saudi Arabia.”

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