South Florida Sun-Sentinel Palm Beach (Sunday)
Dubai’s troubling new boom
Influx of Russian investors’ money has revived projects while also driving up rents
DUBAI, United Arab Emirates — Fourteen years after a financial crisis nearly brought Dubai to its knees, several major abandoned real estate projects are showing signs of life as part of a new economic boom in the citystate.
As with previous upturns in Dubai, war is a driving force. But this time it’s Russian investors fleeing Moscow’s war on Ukraine.
“There’s lots of parts of the world where there are real challenges and people looking for a safe haven,” said Richard Waind, group managing director for Betterhomes, a real estate brokerage in the emirate. “I think that’s a safe haven both for the capital but also for their families.”
While there’s no sign the market could be in trouble similar to that of 2009, some concerns have started to surface. Skyrocketing rental costs are worsening a cost-ofliving squeeze for the foreign workforce that powers the emirate.
Meanwhile, the U.S. Treasury is worried about the amount of Russian money flowing into the real estate market of the most populous city in the United Arab Emirates.
“In theory, there should be significant reputational risk with the UAE apparently acting as a willing bridge, enabling Russian oligarchs to use the Emirates as a way station between the Russian financial system and that of the West,” said Jodi Vittori, a nonresident scholar at the Carnegie Endowment for International Peace who has written extensively on Dubai being a money-laundering haven.
“But the reality seems to point otherwise,” she said.
Dubai’s government and the UAE’s Foreign Ministry did not respond to questions from The Associated Press.
It’s hard to overstate just how much the Emirates has changed over the last halfcentury. Since 1968, the seven sheikdoms that make up the UAE have grown from a British protectorate of some 180,000 people to a federation that’s home to more than 9.2 million. Government statisticians say 3.5 million people live in Dubai alone.
Oil, much of it from Abu Dhabi’s vast reserves, fueled the UAE’s initial modernization. Major structures emerged after Dubai began allowing foreign ownership of “freehold” properties in 2002.
Real estate now represents some 10% of Dubai’s overall gross domestic product. After a slump due to COVID-19 restrictions, Dubai saw a record 86,849 residential sales in 2022.
The average asking rent for an apartment there is over $67,600 per year, with a villa renting for $276,000 annually, according to real estate firm CBRE. Analysts attribute growth in the luxury market to the wealthy fleeing restrictions elsewhere that are in place due to the pandemic.
That pressure has grown outside the world of the ultrawealthy. Rents on average across Dubai are up 26.9% year-on-year, even with anti-price-gouging protections. Families living in villas can expect to pay median rents of $76,000 a year.
Russian money has helped fuel this. Betterhomes saw Russians lead all other nationalities in purchases by nonresidents for the first time last year. Other real estate brokers have also anecdotally acknowledged the influence Russians have had.
“Since the crisis in Eastern Europe, we have seen a lot of Russians, a lot of Ukrainians as well, looking to both move their family and money out there,” Waind said.