11 May 2011

African Investors Eyeing Dubai Real Estate Market

An increasing number of African investors are looking to invest in Dubai's property market, aiming to capitalise on tax-free returns. According to Damac Properties, a leading real estate firm in the Middle East, the confidence has been boosted by the improving investment environment and a more tightly regulated property market in the Emirate. The new rules, it says, will make Dubai a more transparent, better regulated real estate market. "We have witnessed a significant increase in enquiries about our Dubai portfolio from African investors looking to capitalise on favourable conditions in a secure market," said Niall McLoughlin, the firm's senior vice president. "Like most markets around the world, confidence was shaken following the global slowdown. However, strong fundamentals such as Dubai's world-class infrastructure and the introduction of new regulations mean that Dubai remains a leading destination for secure long-term real estate investment."

Dubai Real Estate Regulatory Authority (RERA) says the aim of the new rules is to have a real estate market that comes up to the best international standards.

Dubai has been a real estate hot spot for international investors, but was dealt a blow during the global financial downturn with property prices plummeting. The market is yet to recover as developers are still recording low sales and further price corrections are expected. Injecting more transparency is expected to boost confidence to attract foreign and local buyers to re-enter the markets.

Damac says, quoting CB Richard Ellis, that premium properties in this market attract a potential capital appreciation and tax-free rental yields ranging from 7-12 per cent, making long term investments lucrative.

Jones Lang LaSalle, a global real estate services firm, says the total value of residential property transactions in Dubai rose by more than 20 per cent in 2010, while actual property transactions rose by 20 per cent in the same period. It projects the volumes could jump further in 2011 boosted by price stability in some sections and continued ease on lending conditions.

Damac projects that improved liquidity in Dubai's mortgage market will bolster property market's revival."Now that banks and financial institutions have begun to regain confidence in the market, and are again in a position to offer financing packages, it will start to address the issue of oversupply - one of the major factors in the sector's devaluation," said McLoughlin.

The firm sees a shift in the market from the previous develop-and-sell approach to an increase in the number of investors looking to hold on assets for sustainable long-term income flows.

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