Saudi Arabians were the leading GCC investors in property in Dubai, UAE, in the first half of 2014 with investments worth Dh3.4 billion ($925.5 million), according to a report from global property consultancy Frank Knight.

They were followed by the Qataris who spent Dh1.5 billion ($408 million) in acquiring real estate in the emirate, the Autumn 2014: Dubai Residential Insight report stated, quoting data from the Dubai Land Department.

Kuwaitis purchased property worth Dh839 million ($228 million), Omanis Dh482 million ($131.2 million) and Bahrainis Dh247 million ($67.2 million), it added.

Over the same period, Indians were the biggest spenders, investing close to Dh10.5 billion ($2.85 billion) in the emirate, while British and Pakistani nationals spent Dh5.8 billion ($1.57 billion) and Dh4.5 billion ($1.2 billion) respectively.

The total amount invested in the emirate’s property market in the first six months (H1) of 2014 was Dh50 billion ($13.6 billion) – equivalent to 44 per cent of the 2013 total.

Stefan Burch, general manager of Knight Frank Saudi Arabia and Bahrain, said: “Saudi Arabia, the top GCC investor in Dubai, has always shown keen interest in the UAE property market due the strong economic conditions and buoyant labour markets and we anticipate this trend to continue in the short to medium term as the Dubai market continues to show healthy returns coupled with a high quality of lifestyle.”

“With the introduction of higher transfer fees and mortgage caps, GCC nations perceive this increasingly regulated market as a safe haven for owners, tenants and landlords alike, so we expect a growth in demand in H2, especially in the mainstream residential market which is currently outperforming the prime segment,” he added.

Since the introduction of higher transfer fees and mortgage caps at the end of last year, annual residential price growth has been slowing in both the prime and mainstream segments, said Burch.

“However, the new rules have impacted Dubai’s luxury homes market to a greater degree, with prices in Q2 2014 rising by a relatively modest 6.3 per cent year-on-year (y/y). Over the same period, the mainstream segment saw a 24 per cent y/y increase,” he added.

Why is the mid-range part of the market outperforming?

First, established, mainstream locations such as Dubai Marina remain popular among western expatriates and continue to see healthy demand and thus price growth, Burch explained.

Moreover, newer developments such as Jumeirah Village, Dubai Sports City and Dubai Silicon Oasis are seeing the same, albeit prices here are rising off a much lower base. Thus, with demand for residential property remaining strong in both newer, as well as more established mainstream locations in Dubai, prices in this segment continue to post strong gains.

“Second, the new mortgage rules implemented by the UAE Central Bank are stricter for those buying residential property worth over Dh5 million ($1.36 million),” Burch pointed out.

“For example, if a first-time, expatriate buyer was to purchase a property above that value, they would need to raise a 35 per cent deposit. By comparison, the same buyer looking for a property worth less than that amount would need a down payment of 25 per cent.”

“Third, after halving between 2008 and 2010, both mainstream and luxury home prices have since largely reversed their previous falls. However, rents in the latter segment haven’t kept pace, which unsurprisingly has led yields to harden. By comparison, as a result of a stronger recovery in rents, mainstreams yields continue to look relatively attractive to investors,” Burch concluded. – TradeArabia News Service