International Finance
Magazine Real Estate September-October 2019 Issue

Tech-enabled environments to drive Dubai luxury real estate

Tech-enabled environments
Chinese investors are a new rising segment of luxury real estate buyers in Dubai

The number of property transactions with a price tag of Dh10 million and above in Dubai stood at 194 during the first half of 2019. This was more than the 115 such transactions Dubai saw in the same period last year, according to Data Finder, a UAE real estate insights and data platform.

The platform, which is part of UAE’s The Property Finder Group, further stated that it expected this trend to continue because of various reasons such as revived demand for established luxury projects such as the Palm Jumeirah, Downtown Dubai, and Emirates Hills along with a lot of buyer interest for new projects such as Dubai Hills Estate and Mohammed Bin Rashid City, indicating resilience in Dubai’s luxury real estate market following recent years of slump.

Supercars, luxury shopping malls, five-star hotels, attractive tourist and entertainment destinations, are some of the characteristics that has helped make Dubai the definition of luxury, Niall McLoughlin, senior vice president at Damac Properties told International Finance. This along with an ample choice of outstanding luxury properties, he added, were helping Dubai to further make a name for itself on the global map as a luxury living location, similar to New York.

Expo 2020 to drive luxury property market

Robert Booth, managing director at Dubai-based property developer Ellington Properties, told International Finance that one of the primary factors that will drive the positive momentum in the luxury real estate market going forward is the Expo 2020.

“We see strong growth opportunity for the luxury real estate sector in Dubai, particularly with the positive momentum that the economy gains from the preparations for Expo 2020 Dubai. The event, set to welcome 25 million visitors, will also open doors to more international investors on the opportunity that Dubai offers – which will further drive the growth in demand for luxury property,” Booth explained.

He added that the issuance of long-term visas for professionals and investors would also help build momentum in this segment. He explained this would help promote a stronger and conducive business environment which in turn would catalyse the real estate sector, including the luxury market.

Meanwhile, Aqil Kazim, chief commercial officer at Dubai-based property developer Nakheel, told International Finance that the expo aside, Dubai’s growing population, which is expected to climb from 3.1 million currently to over 5 million by 2030, too would help in creating demand for this segment going forward.

A spokesperson at Emaar, a Dubai real estate company which is listed on the Dubai Financial Market, however, believes there were a number of factors that will help the city continue to be the one of the most sought-after destinations for luxury property in the world. He told International Finance that these factors included the city’s connectivity, central geographic location, world-class infrastructure, variety of leisure and entertainment attractions, strong regulatory environment, and finally, the city’s cosmopolitan community.

Damac’s McLoughlin said that the presence of HNWIs in the Middle East along with the high purchasing power of consumers, especially in the GCC region will also help drive the luxury real estate market in Dubai. Additionally, he said, reasonable pricing of luxury projects in Dubai compared to other popular cities worldwide would also generate demand going forward. Citing a recent report by London-based real estate services provider Savills, McLoughlin said Dubai ranked third on the list of major cities that are less expensive to buy luxury homes.

In this regard, Dr. Martin Berlin, Middle East partner and global deals real estate leader at PwC, told International Finance that the per square meter price of luxury real estate in Dubai was more affordable when compared to cities such as London, New York and Hong Kong. “A $1 million investment could get you approximately 28 square meters in London, 25 square meters in New York, and 22 square meters in Hong Kong. In comparison, a $1 million could get you approximately 138 square meters of luxury property in Dubai,” he said.

Damac’s McLoughlin meanwhile added that the government too has a key role in strengthening the luxury real estate sector. While, governments across the Middle East have adopted a policy of launching initiatives that encourage increased tourism and higher investments, which in turn strengthens the luxury real estate sector, the UAE government had particularly been successful in achieving stable economic growth and prosperity in the country, especially in Dubai.

While various policies in the UAE have helped the real estate luxury sector, a few significant ones include the Real Estate Regulatory Authority (RERA) and the Dubai Land Department (DLD). These regulatory bodies have developed a robust legal and regulatory framework to ensure best practices in activities like property development, marketing, valuation, sale, purchase and brokerage which in turn have helped develop a transparent environment helping attract more foreign investment, McLoughlin said.

Another positive initiative by the government according to McLoughlin was digitisation. Tech-driven solutions across managing contracts, broker information, and mortgage laws, he said were boosting investors’ confidence and helping Dubai hold the position as the MENA region’s most transparent real estate market.

In this regard, Jyotsna Hegde, president at Sobha Realty, an Indian multinational real estate developer which has operations in Dubai, told International Finance that the UAE as a country was moving towards a digital economy with the promotion of smart technology. This, she said, would ensure a positive impact on luxury real estate market going forward.

While these are some of the older government initiatives, the more recent ones that would further boost this segment, McLoughlin said were the government’s decision to allow 100 percent foreign ownership of businesses in certain sectors, long-term visas for skilled professionals and investors, and the recent introduction of the UAE gold card.

Dubai’s luxury portfolio

So, while Dubai as a whole is expected to see positive demand going forward, there are specific locations within the city that is already witnessing an increasing demand. These locations according to Data Finder include the Palm Jumeirah, Downtown Dubai and Emirates Hills.

Nakheel’s Kazim said they had a few luxury projects located in the iconic Palm Jumeirah. One of the completed ones, he said, was its Azure Residences, which included beachfront one and two bed apartments whose prices started at $ 367,000. Another luxury project here, he said, included the Palm Tower, a 52-storey hotel and residential tower whose first 18 floors included the St. Regis Hotel. Prices here started from $ 463,000, Kazim said.

With regard to Emaar’s luxury projects, the company’s spokesperson said that one of its most prestigious projects included the Elie Saab at Emaar Beachfront. As the name suggests, this project, the representative said was being developed in partnership with renowned fashion designer Elie Saab and will include residential units that will reflect the luxurious heritage of the fashion brand’s style and signature apart from overlooking the Arabian Sea, The Palm and Dubai Marina. In addition, the representative said that Emaar had several other luxury projects in Downtown Dubai and other locations such as Dubai Creek Harbour.

Sobha Realty’s Hegde meanwhile said their flagship luxury project in UAE is Sobha Hartland, an eight million square feet waterfront community situated within Mohammed Bin Rashid Al Maktoum City. This project she said offered many residential options from a studio apartment to the most luxurious five bedroom villa, with the latter being priced at Dh 18 million.

Meanwhile Damac’s, McLoughlin, said their newest luxury project Zada, was located in in Dubai’s Business Bay area and came with a price tag of £699,999 (Dh 3.2 million) for one-bedroom apartments which offered views of the iconic Dubai Canal. He added that in the past Damac had, for its luxury projects, joined forces with some of the most recognisable fashion and lifestyle brands such as Tigers Woods Design for a golf course, Italian fashion-houses such as Versace Home and Just Cavalli for its interiors.

With regard to Ellington, Booth said their flagship project was the DT1, which included residential units across 20,000 square metres rising to a height of 76 metres located in close proximity to both Downtown Dubai and Business Bay.

Chinese showing increasing interest

Booth added that while the growing interest for its homes were primarily from UAE residents, it was seeing rising investor interest from South Asia, Saudi Arabia, China, Europe and beyond. Of these, he said, there was a significant growth in interest from Chinese buyers because of various reasons such as UAE being a key player in China’s Belt and Road Initiative (BRI) and the growing trade and cultural relations between the two countries. Sobha Realty’s Hegde too said their company was receiving most interest from Chinese investors, followed by Saudi Arabian, Indian and UAE investors. “In the first two months of 2019, the number of Chinese investors in Sobha Hartland grew by 200 percent,” she said.

Nakheel’s Kazim meanwhile said that while his company has around 30,000 investors from all over the world those from the UAE and GCC constitute for the biggest investor group. Apart from them, it was seeing a strong interest from Indians, Pakistanis, British, Lebanese, Chinese, Russians, and Canadians, he added.

Meanwhile, Damac’s McLoughlin citing the government’s DLD said the top investors by nationality in 2019 were led by Emiratis and Indians followed by the British, Chinese, Pakistanis, Jordanians, and finally the Saudis. Overall, these foreign buyers he said, represented 18.5 percent of the total transactions in Dubai which is equivalent to Dh30 billion.

New generation buyers seek tech-enabled projects

Ellington’s Booth added that this demand was however seeing some key changes. He explained that one of the latest trends they were witnessing was a strong uptake and demand from the younger generation who are design-oriented and seek culturally inspiring living environments. In addition, he said there is also a growing appetite for luxury projects with distinctive USPs. These, he said were not just restricted to just design but also relating to amenities and tech-driven innovations.

Going forward, Booth said that technology will be the biggest game-changer for this segment, as the digital-savvy new generation of buyers seek elegantly designed, functional, and tech-driven environments.

The Emaar representative too believed that technology would also play a key role across all aspects of luxury real estate including construction. The representative cited his own company as an example which had recently announced plans to build their first 3D printed home in Dubai.

Meanwhile Sobha Realty’s Hegde said the most prominent trend the company was seeing is the introduction of mixed use developments. This, she said was something developers were actively pursuing to give residents the comfort of community living with all necessities and amenities available within convenient reach.

While Dubai’s luxury real estate segment seems to be showing positive momentum, there are a few challenges it could face. These PwC’s Dr. Berlin said, included rising interest rates, fear of a global recession, and tighter monetary policies. They were capable of creating a downward pressure on the market, he added. Damac’s McLoughlin meanwhile said fall in oil prices, government’s spending restriction and potential fall in tourism could also be detrimental to the growth of the luxury real estate segment.

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