Potential investment worth billions of dirhams from India and China is sitting ready to enter Dubai's property market even as some areas of the emirate show signs of recovery, estate agents say.
Victor Zhu, a broker with West Legend Investments, said while there are tangible signs of a pickup in sales, especially from Chinese, Indian and Iranian investors, an even quicker recovery could come about if obstacles to homebuying, such as the short-term visa, were removed.
"So many Chinese investors are interested in Dubai now that the prices have gone down so much," he said. "But the six-month visa is a problem for them. They want to buy as investments and to rent out, but they need better laws before they will bring their money here."
Over a two-year period, investment from mainland Chinese buyers increased more than sevenfold, from Dh82 million (US$22.3m) in the first eight months of 2008 to Dh578m in the same period last year, according to data from REIDIN.com.
Multi-year residency visas were once guaranteed by developers with home purchases, but a law introduced in 2009 limited visas to six months and restricted eligibility to those with a monthly income of at least Dh10,000, along with other criteria. Observers say the law is under review, but there has been no official acknowledgement of the issue from the Government.
In China, property prices have been soaring as the country faces its own potential asset bubbles. Meanwhile, savings are on the rise. This combination is encouraging more mainland Chinese investors to look abroad for long-term assets, Mr Zhu said. More Chinese companies are also looking to Dubai as the ideal hub to locate offices to serve their growing portfolios of projects in Africa and the Gulf.
"This is the main port centre of north Africa, east Africa, west Africa and the Middle East," Mr Zhu said.
Meanwhile, Indian investors have emerged as the group most confident that the Dubai market has bottomed out and is ripe for investment.
Indians were the largest non-UAE purchasing bloc in the first eight months of last year, buying Dh9bn worth of property, or 19 per cent of total sales of Dh48.3 billion, according to data from REIDIN, which uses transactions registered with the Dubai Land Department. In some cases, there might be a lag between the time of the sale and when it is registered, but the data are useful for finding market trends, analysts say.
Ranjeet Chavan, of SPF Realty, said many Indians are sitting on cash that they wanted to use for second homes. With a 6 to 7 per cent return on interest still available, Dubai is also still drawing in investors. Indians working in Dubai are also beginning to buyhomes there rather than paying rent, a major signal of the market turning around.
"More and more end users are coming into play," Mr Chavan said. "There has been a paradigm shift in the end-user market. So many people did not want to buy during the boom because it was expensive. They are saying this is the time to enter because the prices were under control." Of the buyers SPF is helping on home purchases, about three quarters intend to occupy the homes. About 60 per cent of those are buying with mortgages. Interest rates are falling and loan-to-value ratios are softening, which is broadening the spectrum of those able to buy in Dubai. But some buyers are having trouble finding high-quality homes. Despite a glut of homes and offices, only a fraction is in demand.
A large group - Indians living in Africa - is staying out of the market until an improved visa law is introduced, Mr Chavan said.
"They want a three-year visa law," he said. "That market has been very affected. They aren't coming here to buy right now."
Who bought what
- Dubai posted Dh48.3 billion (US$13.14bn) of property sales in the first eight months of last year, against Dh56.6bn in the same period in 2008 and Dh36.2bn in the period in 2009.
- Since 1973, Indians have purchased Dh31bn of Dubai property, against Dh25bn by UK buyers, Dh14bn by Pakistanis and Dh13.8bn by Iranians.
- Indians were the largest non-UAE purchasing group last year, buying Dh9bn worth of property in the first eight months of the year, accounting for 19 per cent of sales.
- In 2008, Indians bought Dh6bn of property, accounting for 10.6 per cent of purchases.
- Mainland Chinese purchases increased by more than sevenfold, from Dh82m in the first eight months of 2008 to Dh578m in the same period last year.
- UK citizens acquired Dh5.6bn of Dubai property in 2008 and Dh5.5bn last year, representing 11.5 per cent of sales.
- Iranians were the only large segment to post growth for sales, increasing from Dh2.8bn in 2008 to Dh4.2bn last year.
- Nigerians bought Dh117m of property, up from Dh33m in 2008.
- Ireland accounted for Dh570m in sales in the first eight months of last year, up from Dh534m in 2008. Russians purchased Dh800m of property in 2008 and Dh726m last year.