DUBAI, July 29 (Reuters) - Dubai's red-hot property market surged in the first half of the year as investors piled in, with Russians among the top five buyers as the emirate benefits from an influx of wealth in the wake of Western sanctions.

The first half saw residential real estate transaction volumes up 60% with an 85% rise in the value of properties sold, property consultancy Betterhomes said in a report.

The top buyers were from India, the United Kingdom, Italy, Russia and France, in that order, followed by Canada, the United Arab Emirates, Pakistan and Egypt tied in eighth place, Lebanon and China.

The number of Russian buyers surged 164% in the first half of this year from the first half of 2021, Betterhomes said in response to a Reuters query. The numbers for France and Britain rose 42% and 18%, respectively, while those from India fell 8% and Italy dropped 17%.

Demand was boosted by geopolitical instability in Europe and mortgage buyers looking to get in ahead of well-telegraphed interest rate hikes, Betterhomes said.

Reuters reported earlier this year that Russians were pouring money into Dubai properties, seeking a financial haven in the wake of Western sanctions on Moscow over its invasion of Ukraine. read more

"The market has faced growing headwinds in the form of rising interest rates and a strengthening dollar, but has so far proven to be robust with little sign of slowing," Betterhomes said.

In the first half of the year, a record 37,762 units were sold, it said, citing Dubai Land Department data, with residential property market transactions totalling nearly 89 billion dirhams ($24.23 billion).

Dubai's property market began recovering from 2020's severe downturn early last year with buyers snapping up luxury units after the emirate eased pandemic restrictions faster than most cities around the world.

However, S&P Global Ratings said in October that Dubai's real estate recovery was fragile and uneven, and an oversupply of residential properties would pressure prices in the long run.

Luxury property transactions were up 87% compared with the first half of last year, with apartments making up 62% of all transactions, Betterhomes said.

Investors dominated sales, making up 68% of all buyers, up 10% compared with a year earlier.

 The UAE has seen property prices recover from Covid-19 thanks to a rise in oil prices and an increase in relocations, notably from Russia.This is the main finding from a report published by ratings agency Fitch.It describes the UAE real estate market as “anaemic” during the pandemic. In 2020, Dubai’s population fell by 8% as many in the expat community which makes up around 90% of the population were forced to emigrate after losing their jobs.However a successful vaccination programme enabled UAE to open up earlier than other countries and, along with liberalised residency rules, Dubai’s population grew by 2% in 2021.Furthermore, an influx of skilled workers along with a rise in oil prices has seen an increase in Dubai residential property sales by 81 in Q1 year-on-year and a 125% rise in the value of property transactions.However Fitch also warns that not every sector in the UAE’s property market has seen a return to pre-pandemic levels – Dubai’s office market may take several years to recover due to an oversupply.

Bolstered by strong capital growth, high yields and government-led initiatives that incentivises investment in the property sector, Dubai continued to be a prime target for investors, according to Betterhomes, a leading property consultancy.

All segments of Dubai’s real estate market recorded growth in the first half of 2022 with sales transactions and values holding up well, Betterhomes said in its H1 2022 Dubai Real Estate Market Report.

“Despite headwinds in the form of rising interest rates and a strengthening dollar, Dubai’s real estate market remained busy and robust in the first half of 2022,” it said.

Indians topped the list leading buyers by nationality with those from the UK, Italy, Russia and France rounding the top five, according to the report.

Setting a new record for transactions in the Dubai, DLD (Dubai Land Department) recorded 37,762 total units sold from January through June this year, which is 60 per cent higher than the same period in 2021. There was also an increase of 85 per cent in the total value of sold properties compared to H1 2021.

Richard Waind, group managing director, said while globally, many real estate markets are showing signs of slowing down in the face of rising inflation and the inevitable response in the form of rising interest rates, he is confident that Dubai market “is uniquely placed to weather any short-term storm and, as we have shown throughout the pandemic, could well be a net beneficiary of global uncertainty".

He said the UAE could well be a net beneficiary of global uncertainty. High oil prices improved the UAE’s fiscal position.

“And while rising interest rates will undoubtedly have an impact, our market is less exposed to mortgages than in the majority of the world, and the typical Dubai consumer is perhaps in a better position to tolerate this normalisation of rates,” said Waind.

“Rising taxes, inflation and geopolitical instability in the West, and continuing Covid restrictions in the East, are likely to continue to push more expats to relocate to the UAE. Dubai will continue to reform employment and visa regulations to attract talent, and the DLD has taken great steps this last six months by making available all real estate data to consumers, improving transparency, and giving investors greater confidence to invest,” said Waind.

Waind said that prices in the market are showing signs of normalizing.

“Supply constraints in the secondary market have shown signs of easing in this last six months as sellers have looked to realise recent price increases. Further, developers have responded to the improved market conditions by increasing launches and bolstering the off-plan market.”

“Over the second half of the year, we can look forward to cooler weather and the World Cup, which is bound to again bring many new visitors to these shores. We will see interest rates continue to rise over the coming months, and we expect both rents and sales prices to continue to go up modestly for the remainder of the year. But historically, rates and prices still remain low, while yields and capital growth are strong, so for those taking a long-term view, Dubai real estate remains one of the best investment opportunities available,” he said.

While buyer demand increased by 23 per cent versus H1 2021, signed MoUs increased by 138 per cent year-on-year basis. Townhouses saw the highest rise in listings by 141 per cent, followed by apartments with an 18 per cent increase, while villa listings saw a modest growth of 2.0 per cent.

According to the report, investors made up 68 per cent of all transactions versus end users at 32 per cent. Some 31 per cent of transactions were mortgage-backed purchases.

Average rental prices for apartments and townhouses climbed by 29 per cent and 33 per cent and villas rose by 64 per cent, while occupancy rates in freehold areas increased to 90 per cent and leasehold areas increased to 86 per cent.

• Dubai and Abu Dhabi recognized as top global improvers in 2022, benefitting from a concerted government focus on improving market transparency
• Dubai enters ‘Transparent’ tier status for the first time driven by new regulations and enhanced digital services
• Kingdom of Saudi Arabia maintained its position in the top 50 global rankings 

Dubai, UAE: The real estate markets of Dubai and Abu Dhabi have been recognized as the top global improvers in 2022, according to JLL’s latest Global Real Estate Transparency Index (GRETI). Dubai also entered the ‘Transparent’ tier for the first time underlining its position as the most transparent property market in the Middle East and North Africa region. The emirate gained three ranks in the index to 31st position globally and is the only property market in MENA to feature in the ‘Transparent’ tier.

Dubai’s gains in the transparency ranking are led by new regulations around market lending practices, beneficial ownership tracking and sustainability reporting as well as enhanced digital services and data provision such as service charge management, automated valuations, and transactions databases through the Dubai REST platform. The gain in ranking also builds on the new initiatives announced by the Dubai Government with private companies such as transaction-based sales indices and a building wellbeing certification.

HE Sultan Butti bin Mejren, Director General of Dubai Land Department, said: “With the global recovery of the economy, we recognized the need to focus on improving market transparency to make better decisions that will support both developers and investors alike. Today, investors from around the world are increasingly looking at Dubai’s real estate to invest, and we, at Dubai Land Department, are committed to enhancing transparency within the sector.”

Bin Mejren added: “We are pleased that Dubai has entered a new phase of transparency and is the only city to do so in the MENA region. The government’s ongoing efforts that are driving digital services and data provisions, new regulations and sustainability reporting have helped advance Dubai’s ranking in this year’s Global Real Estate Transparency Index, which is an important guide used for cross-border investment and corporate occupiers to inform their decision making.”

Abu Dhabi, which ranked 45th globally, gained one rank and maintained its position in the 'Semi-Transparent' tier. The improvements reflect the expansion of digital services through the Dari platform including sales and lease management and development and transaction databases. The Department of Municipalities and Transport (DMT) also published its first code of ethics covering real estate professions, and the property market has benefitted from increased data provision by private providers in new sectors, the report states.

Thierry Delvaux, Chief Executive Officer at JLL, Middle East, Africa and Turkey said: “Our 12th Global Real Estate Transparency Index comes at a time of significant change across nearly every aspect of the global real estate market. Faster progress and greater global alignment across industry initiatives and standards are needed to meet growing pressure from companies, consumers, investors and the public for higher levels of transparency. This year, Dubai and Abu Dhabi have been recognized as top global improvers, benefitting from a concerted government focus on improving market transparency.”

Saudi Arabia maintained its position in the top 50 of the global rankings, reinforcing its position at a regional level. The kingdom scored particularly well in the category of Listed Vehicles’ Corporate Governance transparency. This is due to a combination of the solid REIT regulatory framework in place (introduced in 2016) and its listed vehicles having good-quality financial accounts, data disclosure and corporate governance practices. KSA also scored well on its Investment Performance transparency – for the listed market, it has the Tadawul Real Estate Development Index and several of its REITs are constituents in the FTSE EPRA NAREIT Global REITs Index.

According to the report, a common aspect of the changes taking place across global real estate markets is the need for greater harmonisation and alignment in sustainability initiatives, regulatory environments, technologies, and data frameworks.

Many companies are focusing on the Environment, Social and Governance aspects of their business, and more regulations and metrics to enhance and provide guidelines for these goals across the sector are likely.

Further, privacy risks and need for more clear and rigorous regulations around data management and security are rising as the amount of data being collected by companies and governments on their buildings, employees and communities increases rapidly.

Produced jointly by JLL and LaSalle Investment Management, GRETI has been charting the evolution of real estate transparency across the globe since 1999.  Updated every two years, the 12th edition this year is based on a comprehensive survey of the availability and quality of performance benchmarks and market data, governance structures, regulatory and legal environments, transaction processes and sustainability instruments covering 156 cities in 94 countries and territories.

It’s been two months since the curtains were drawn on Expo 2020 Dubai.

Despite a year’s delay, the event successfully managed to bring the world together in Dubai. The preparations to welcome a global audience to the emirate began when Dubai was announced as the host of Expo 2020.

As a result, the real estate sector went into over-drive, developing properties in anticipation of the millions of visitors expected to come to the country. The industry soon realised that demand for short-term rental units and increased interest in property ownership, either as a resident or an investor, would rise rapidly. For many cities, hosting a mega event is now the single largest undertaking in urban development.

The first supportive argument for hosting a global event would be the potential increase in visitor numbers, a spotlight or halo effect that brings new attention and vibrancy to the host city. Similarly, expenditure on hosting a mega event is often justified via the multiplier effect and a boost to the national economy.

Real estate studies in a range of global cities do find a positive impact on property values. Though as we saw, these property price increases are not simply linear. Academic studies have found that the largest price increases in property prices hosting mega events occur in the five years after the event. So are we on a similar trajectory in Dubai post the expo? Following a dip in real estate activity during the beginning of the Covid-19 pandemic, housing prices in Dubai began to recover in 2021 in the run-up to Expo 2020, particularly in the luxury real estate sector, which ended the year with record-breaking transactional value and sales volume.

A market report by Property Monitor shows that property value in Dubai now stands at 55Dhs1,000 per square foot, the highest since January 2019. Additionally, it is reported that transaction volumes in February this year stood at 6,346, growing nearly 10 per cent monthly. Furthermore, a total of 12,119 sales transactions were recorded year-to-date, a 17.7 per cent increase over 2017, the previous best start to a year. Major public and private developers in the UAE have been focused on ensuring a faster execution of the ongoing projects to deliver the best quality product to investors.

The pace has also been a response to various government initiatives and amendments to laws that will undoubtedly attract more residents and long-term investors to the country. For example the recent amendments to the citizenship laws allow investors, professionals, special talents and families to seek long-term/permanent residence under certain conditions.

Additionally, the UAE has made many additions to its real estate laws. These include the new ‘Dubai Building Code’, which outlines a set of construction rules promoting sustain-able development and innovation in building design and reduction of energy and other running costs, which is critical in today’s ever-important ‘ESG’ investing.

However, with all these changes and an increased interest in buying a property, it is also imperative to look at the inventory currently available in Dubai while prices also seem to be climbing. A recent report by S&P Global suggested that property prices and rents in Dubai’s residential market will continue to increase in 2022.

In addition, Property Monitor reported that more than 3,000 off-plan residential units entered the market for sale in February. Town-houses represented 58.5 per cent by volume of this new inventory, while apartments and villas accounted for 36.8 per cent and 4.7 per cent, respectively.

According to Property Monitor, the month-on-month increase is largely the result of newly handed over projects that are now eligible for home financing, particularly for townhouses, which saw loan volumes increase by 58.9 per cent. At present, Dubai is witnessing a demand-outstripping-supply playbook; and with global inflation soaring, the increased costs of build-ing materials for new development and higher borrowing costs, new developments might stagnate, limiting new supply entering the market and pushing house prices higher. While Expo 2020 has been a major catalyst in real estate growth in the emirate, the next phase will be even more exciting.

Despite the rising real estate prices and increasing inventory, the interest from international and local buyers and renters will be an ongoing trend, with Dubai’s supportive government legislation being a key driver of new population growth over the next five years. The city is developing to accommodate more new businesses, more flexible ways of living and working in Dubai, and the recent trends in ‘lifestyle migration’ into Dubai will undoubtedly continue and boost future demand for the real estate sector.