Charm of Dubai prop­er­ties draws in­vest­ment

The Pak Banker - - 6BUSINESS -

As Chi­nese prop­erty in­vestors heat up prices in many of the world's big­gest cities, China buy­ers are now search­ing be­yond tra­di­tional hot spots for bar­gains and higher re­turns, rang­ing from land in Dubai to stu­dent hous­ing in Manch­ester.

The in­vestors range from wealthy in­di­vid­u­als and pri­vate equity funds buy­ing res­i­den­tial units to com­pa­nies and funds set­ting up lo­cal joint ven­tures to in­vest in prop­erty projects.

"Peo­ple in­vest in emerg­ing mar­kets for higher yields, lower en­try prices, and higher cap­i­tal ap­pre­ci­a­tion," said SPV Global di­rec­tor Clara Ye­ung. "Some in­vest for va­ca­tion pur­poses... good prospects for an econ­omy or political sit­u­a­tions, for ex­am­ple, the World Expo 2020 in Dubai or the change of gov­er­nor in Myan­mar are some other rea­sons to in­vest in th­ese emerg­ing mar­kets." Chi­nese were the sev­enth big­gest prop­erty in­vestors in Dubai last year, pump­ing in $463 mil­lion in the first nine months of 2015 com­pared with $354 mil­lion in all of 2013, ac­cord­ing to Sa­jid Ali, di­rec­tor of Su­mansa Ex­hi­bi­tions who or­gan­ised a Dubai prop­erty show in Hong Kong in Jan­uary.

Chi­nese in­sti­tu­tional real es­tate in­vest­ment in New York and Syd­ney was close to $6 bil­lion and $4 bil­lion, re­spec­tively, last year, up from $1.2 bil­lion and $3.5 bil­lion a year ago.

"The av­er­age price of a stu­dio apart­ment in Hong Kong's (cen­tral) area is HK$7 mil­lion ($900,000), while for the same amount one can buy seven stu- dio apart­ments in Dubai," Ali said, adding re­turns on in­vest­ment in Dubai are as much as 7.2 per cent, com­pared with 2.8 per cent in Hong Kong.

One would-be buyer who gave only his sur­name Chen, said he is con­sid­er­ing apart­ments in ei­ther Dubai or Bangkok. "It's im­pos­si­ble to buy in Shen­zhen now, prices are too high," said Chen. Home prices in the south­ern Chi­nese city in Jan­uary were up 52 per cent from a year ear­lier.

Dubai de­vel­oper Nakheel said Chi­nese bought 70 per cent of its al­most 600 town­houses sold at Warsan Villa, a de­vel­op­ment close to its Dragoncity shop­ping mall. Nakheel also sells land, which is for free­hold in Dubai. "Many Chi­nese bought land from us; they want to de­velop and they want it for rental be­cause it's around a 10 per cent yield for the de­vel­op­ment," said chair­man Nakheel Ali Rashid Ahmed Lootah.

Stu­dent hous­ing, al­ready a hot tar­get for pri­vate equity, is also in­creas­ingly at­tract­ing Chi­nese in­vestors, some of whom buy such prop­er­ties with­out even vis­it­ing them first.

"It's dif­fer­ent if you're buy­ing a three mil­lion pound ($4.16 mil­lion) man­sion in Lon­don and you want to see it. They're buy­ing pri­mar­ily for in­vest­ment, as long as the fig­ures are right they'd be buy­ing any­thing," said Julie Har­vey, di­rec­tor of prop­erty in­vest­ment com­pany Pin­na­cle Al­liance based in Lon­don. Stu­dent hous­ing is close to cam­puses which are not usu­ally in cen­tral ar­eas. In Manch­ester, their rental yield rate is around eight per cent and their cap­i­tal growth was around 10 per cent last year, ac­cord­ing to Har­vey.

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