Chinese investors getting more interested in Dubai's real estate market

Juwai.com said Chinese investor interest in the Dubai real estate market rose by 1,200 percent by August 2015

  
Aerial view of Dubai Marina.

Aerial view of Dubai Marina.

Reuters/Ahmed Jadallah
31 May 2016
DUBAI: China's current status as a global financial giant has not been achieved overnight but earned through consistent efforts.

The resultant rise in affluence has given wings to Chinese investors and encouraged them to flock to other countries in the hope of making savvy investments.

As a way of preventing the over-saturation of the Chinese markets, the Chinese government has been rallying investors to look for investment opportunities abroad.

The Chinese real estate market underwent drastic changes in the past few years that left investors high and dry.

The changes have mostly been influenced by low rental yields, stock market downturn and low interest rate, high prices and low capital gains.

As a result, the Chinese have found the UAE's, especially Dubai's, real estate sector a lucrative investment option.

Chinese were ranked the seventh biggest property investors in Dubai in 2015, investing around $460 million in the first nine months of the year.

Juwai.com said Chinese investor interest in the Dubai real estate market rose by 1,200 percent by August 2015, as compared to the previous year.

But let's consider a few points that help clarify why UAE makes so much sense to China's wealthy.

High Rental Yields Combined with Excellent Capital Appreciation

Rental yields in Dubai can go as high as 8 percent to 10 percent for apartments, depending on the locality, according to UAE property portal Bayut.com.

Meanwhile, yields for luxury villas is 5 percent to 6 percent.

Moreover, capital appreciation is 20 to 30 percent annually in the apartment category and more than 15 percent for villas.

Then there is also a big difference between property prices in, say, Dubai and Hong Kong.

According to Global Property Guide, returns on property investment in Hong Kong stand at 2.82 percent.

Growing Chinese Population in Dubai

Increasing trade and business cooperation between China and the UAE has resulted in a steadily growing expat Chinese population due to which the Asian economic giant prefers to do business in the gulf country.

According to rough estimates, the Chinese population in Dubai has grown by 53 percent in the last five years to about 230,000.

If this is not enough, more than 4,000 Chinese companies are currently operating in the UAE to capitalize on Dubai's geographical location.

Opportunities Abound
Dubai is the preferred investment destination not only for Chinese citizens, but for many nationalities around the world also. The UAE in general and Dubai in particular provide some of the best incentives as far as real estate business is concerned and keeps attracting foreign investors in large numbers. The emirate offers low property prices, lucrative rental yields, zero rental income tax, investor security, residence visas on property purchase above AED 1 million, and an unprecedented quality of life.

Close business ties

China is the largest trading partner of Dubai, and interestingly enough it is also the second-biggest trading partner of the UAE behind India. This further inspires businesses to grow through joint ventures.
Due to strong business ties between both the countries, Dubai properties are still profitable investments for Chinese investors, even though, the Chinese Yuan has undergone quite a devaluation.

Skyrocketing property prices at home

In a recent development, Shenzhen-based real estate agency Qfang.com signed an agreement with Dubai's DAMAC Properties in a move to promote property sales in the emirate.

This initiative has proved appealing to Shenzhen investors who have been left in the lurch by developments in the local property market that has experienced considerable price hike between April and June last year.

Previously, average prices of residential projects in Shenzhen had risen by 31 percent year-on-year in June to 30,713 yuan per square metre after the central bank changed its loans policy.

This rise has driven local investors to look for international investment destinations to earn good profits.

International property conventions attracting investors

Keen Chinese interest in the UAE real estate sector has proved fruitful for the Emirati property market after investment from China in Dubai rose to a whopping 300 percent (AED1.3 billion worth of business) in 2014 compared to 2012.

Chinese investors' interest in UAE's property market has not been the result of an epiphany, but has been inspired by constant efforts on part of the UAE government.

A point in time was the Hong Kong Convention and Exhibition Centre that hosted the Dubai Property Show from January 28-30, 2016.

The event saw Emirati real estate companies introducing Chinese investors to favorable business environment in Dubai's realty market, showcasing the finer points of investing in the emirate.

So while Chinese investors continue pouring money into profitable avenues around the world, Dubai will always have a special place on their investment calendars, with the city reciprocating the gesture with continued lucrative return on every penny spent. (https://www.bayut.com/)

© Arab News 2016

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