ASIA’S WEALTHY LOOK TO DUBAI AMID HOUSING MARKET BOOM
UAE’s glitzy hub is one of the world’s most affordable for luxury homes, but not for long, experts say
Hong Kong marketing executive Simon Cheng has been carefully weighing his options when it comes to where to buy property.
In the case of Japan, he was worried about the tax, the location and the local economy. Between Canada and Dubai, he found the glitzy financial hub of the United Arab Emirates (UAE) the more attractive of the two.
“Rental yield in Hong Kong is around 2 per cent, compared with 6 or 7 per cent I expect in Dubai,” he said. “It’s a better longterm investment. I’m not worried about being unable to rent out my property in Dubai. People are rich there.”
The city is one of the world’s most affordable luxury residential markets, according to Knight Frank. For US$1 million, one can buy a 226 sq ft flat in Hong Kong or a 1,130 sq ft home in Dubai, according to the consultancy.
But it remains to be seen how much longer Dubai can hold onto that title as the property market is picking up momentum.
Home prices in Dubai increased by 5.6 per cent in the first quarter, climbing for a ninth consecutive quarter, Knight Frank’s data showed. Luxury homes in particular surged by 44 per cent last year, the most globally, compared with the 1.3 per cent decline in Hong Kong.
With only 289 homes in Dubai’s prime districts expected to be delivered by 2025, Knight Frank forecast the “clear demandsupply imbalance” to further push up prices by 13.5 per cent this year.
The growth has prompted expatriates like Mrs Lau and her husband, who moved to Dubai from Hong Kong eight months ago, to buy a town house after renting for four months.
Mrs Lau, who did not want to use her first name, was keenly aware of the skyrocketing rents in Dubai, which rose by 25.8 per cent in the first four months of this year, data from CBRE showed.
“If rents and prices keep rising, buying a home here for our own use is not a bad thing,” she said. She is not alone.
“Many new arrivals start looking for homes to buy within the first two months because they see how prices are surging,” said Stephanie Yim, an agent at Bemine Properties in Dubai.
The influx of ultra-wealthy investors has boosted transaction volumes. Last year, the city emerged as the world’s fourthmost active market for luxury property sales, with 219 homes worth more than US$10 million sold for a total of US$3.8 billion, trailing behind New York, Los Angeles and London, according to Knight Frank.
In the first quarter of this year, 88 such homes were sold for more than US$1.63 billion, thanks to strong demand from ultra-highnet-worth individuals – those with a net worth of US$30 million or more. Average transaction prices rose by 16 per cent.
For the whole year, Knight Frank predicts US$2.5 billion will flow into Dubai’s properties from individuals with a net worth of more than US$3 million.
Knight Frank said a large part would be coming from the mainland, Hong Kong and Singapore as its survey found 90 per cent of this group was interested in buying this year.
“Clearly there is an element of revenge spending mixed in there as we saw elsewhere in the world when the Covid restrictions were scaled back,” said Faisal Durrani, partner and head of Middle East research at Knight Frank. “We’re likely to see that from locations such as China in particular.”
Since the start of the year, property consultancy Juwai IQI has been fielding growing inquiries about homes in the UAE from mainlanders. The emirate climbed three places to rank as the sixth-most popular destination, its highest ever, according to Juwai.
The interest from Asia’s wealthy has prompted Dubaibased agencies to tap buyers from the region. Huaxia Real Estate hosted presentations in Malaysia and Singapore last week and organised tours in Dubai, while D&B Properties set up a Chinafocused team in May.
But Dubai’s property market is not without risk. It has been on a roller-coaster ride over the past two decades and was highly correlated to oil prices, UBS said in a report in October.
The Swiss bank said Dubai’s home price growth was likely to remain high in the coming quarters, thanks to looser residence requirements, but that would gradually recede amid higher financing costs.
“In the long term, with existing oversupply and new construction continuing to outstrip population growth, Dubai’s real estate ride is most likely to remain bumpy,” it said.
Dubai was also vulnerable to global macroeconomic conditions, Knight Frank warned. Its survey found that, while global investors were keen, they were concerned about rising inflation, economic slowdown, oversupply and conflict in eastern Europe.
Azar Zaidi, a Post editor who relocated to Dubai in February, is on the lookout for a house but said he “will wait until things calm down a bit”.
“It seems the market is super hot right now, and we don’t want to overpay,” he said.