UAE: Property investors seek income generating assets

Saturday, Apr 20, 2013

Ultra-prime homes in some markets outside the region have become dearer, with values doubling over the last seven years, as the ultra-rich are shifting their capital to income-generating residential unitsAnalysts have noticed a shift in investor behaviour. Whereas before billionaires used to seek safe haven in real estate, they are now seeking to set up homes in locations that pay dividends. Last year, huge pickings were noted in places like New York, Moscow and London, where gross residential yields ranged between 5.2 and 6.4 per cent“The motives for real estate acquisition have shifted. While investors used to be primarily seeking safe haven assets in which to store wealth, we now detect an increasing interest by global investors in income-producing assets,” said real estate adviser Savills in its latest World Cities Review obtained by Gulf News.

“The past [few] years have seen a huge appetite for ultra-prime residential property in the world’s premier cities. Inevitably, this increased activity by wealthy buyers has caused significant price rises in many locations,” the report said.

Singapore and Mumbai have seen the highest jump in ultra-prime values since 2005 at 232 per cent and 176 per cent respectively. In terms of overall values, Hong Kong stood out with a record deal: $13,100 per square foot for a house in Deep Water Bay Road sold in 2011. The ultra-prime market in London posted a 107 per cent growth since 2005, while New York’s billionaire real estate recorded 47 per cent growth.

Experts said there are signs that the UAE market will catch up soon. Both sale prices and rents in the UAE plunged during the downturn and have just recently gone back up.Current prices at the most expensive property Burj Khalifa, pegged at Dh3,700 per square foot.

“The UAE is still at this stage some way behind the more established global real estate hot spots such as Paris, London and Singapore,” Jonathan Fothergrill, director of valuations at Cluttons Dubai, told Gulf News.

“Notwithstanding, we consider that the UAE is indeed catching up at a fast pace, with this catching up process running in tandem with the development of the UAE economy itself and the development and promotion of Abu Dhabi and Dubai as global cities,” he added.

Fothergrill said they expect that prices in the country will continue to rise this year. He noted that the UAE real estate market is different in that it has only been open to overseas investors since 2002, and even at that time, foreign ownerships were limited to certain locations.

“The demand and supply dynamics of the UAE market are very different to other markets. In addition, prices in Dubai are continuing to rise once more after crashing up to as much as 60 per cent during the downturn which interrupted the upward path of prices which had been happening since 2006,” he added.

A spokesperson from Star Group Real Estate pointed out that markets like Singapore and Mumbai are more mature. Their legal frameworks have long been established and gained the confidence of wealthy investors.

“Dubai, on the other hand, is a new market and saw a major boom followed by a severe crash with vague laws. However, with the recent economic boom, increase in population, better economic opportunities, revision of real estate laws, the industry is back on track and heading towards a more realistic growth, with more end users and investors looking for a long-term gain,” the spokesperson told Gulf News.Afew select properties in Dubai, however, have posted 45 to 166 per cent increase from 2006 to 2013. Large villas at the Palm Jumeirah, which were selling for Dh11 million in 2006 are now trading at between Dh19 and Dh20 million, while smaller villas went up from Dh4.5 million to Dh11 to Dh12 million, according to Fothergrill. Cluttons’ data showed that the highest prime residential yields in the most sought-after locations in Dubai were in the range of 5 to 6 per cent.

By Cleofe Maceda Senior Reporter

Gulf News 2013. All rights reserved.


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