Experts say, the declining British housing market and the deteriorating pound hit Dubai’s real estate growth as British purchasers, one of the emirate’s largest groups of foreign investors, tighten their belts.
“I estimate a 10% drop in UK buyers,” Stefan Schurmann, a real estate analyst at EFG Hermes in Dubai, United Arab Emirates, said.Jason Goff, head of treasury sales at Emirates Bank said favourable exchange rates for British investors buying property in the UAE are already a “distant memory”.
Goff expects sterling to fall below $1.90 this year making it more expensive for U.K. investors to buy property in dirhams, a currency that’s pegged to the US dollar. Sterling has fallen about 2.5% against the dirham over the last year.Dubai-based investment bank EFG Hermes estimates that British buyers now account for 12% of international property investors in the emirate, behind Saudi Arabians, with 5.3bn dirhams worth of investments and Indian investors with 5.2bn dirhams.
There are more than 100,000 UK expatriates, close to the current population of the UK city Exeter, living and working in the emirates, according to the British Embassy.The Dubai Land Department estimates that British investors own property worth a total of 4.7bn dirhams ($1.3bn) in Dubai.
Real estate companies have invested heavily in advertising Dubai property in the UK Companies like Damac Properties, the largest privately-owned UAE developer, have even resorted to offering free luxury cars to prospective British buyers.
Falling house prices in the UK, which could dip 10% this year, and the higher cost of buying property in Dubai and Abu Dhabi could also dampen sentiment amongst prospective British buyers. The cost of a home declined 0.9% to £189,027 ($97,941) in April, from a year earlier, HBOS, the UK’s biggest mortgage lender, said this month.
In contrast, surging land prices in Dubai, up 184% over the last four years and rising demand, continue to drive up home prices in Dubai.According to a survey by Dubai-based property agents Betterhomes the average cost of a home in Mirdif, a white collar Dubai suburb, is AED6.7mn, while an apartment in Jumeirah Beach Residence will cost 3.4mn dirhams on average.“The current comparative fundamentals of the two real estate markets couldn’t be more different,” said Jawad Mian, a real estate fund manager from Dubai-based Rasmala Investments.
But Dubai-based real estate agents argue that a downturn in the UK’s housing market and the weakening pound will make the sheikdom’s property market more attractive to hard pressed British investors. “The falling pound and property prices may mean that UK investors will invest in the Gulf region because of opportunities here and limited opportunities at home,” said Blair Hagkull, managing director of JonesLang LaSalle’s Middle East unit.
Dubai’s economy is benefiting from a boom in Gulf economies as oil prices surge to new records above $135 a barrel, flooding the region that pumps about a fifth of the world’s crude with capital. The emirate expects 184bn dirhams in real estate investment by 2010.
