Russians are massively buying up real estate in Dubai. Why is it beneficial?
In the first half of 2022, the demand for overseas real estate among Russians increased by 84 percent compared to last year. Almost half of those who buy property abroad choose Turkey and Dubai . But if people go to Turkey to live – real estate here can be bought from 30 thousand dollars, and in the long run to obtain citizenship – then Dubai, first of all, provides business opportunities. The average check for housing in the UAE is ten times higher than in Turkey, but the return on investment is also higher. For most buyers, such an acquisition is a way to save capital and protect themselves from exchange rate fluctuations. Experts consider the market promising and point out that it has its own unexpected features. Million purchases in thirty seconds – in the material “Times News“.
A snow-white mansion clad in Italian marble, ten bedrooms, a gym and a hairdresser, a seventy-meter private beach – a villa worth 280 million dirhams ($76.2 million) was sold this spring on Palm Jumeirah. The amount broke the record of 2015, when a huge mansion for 185 million dirhams found its buyer in Dubai.
Another big deal was made in the fashionable district of District One at the beginning of the summer – a mansion worth $24.26 million was sold. The 3,000-square-foot, eight-bedroom house was considered the most expensive in the area. According to rumors, it was acquired by an investor from Russia.
From a poor village to the richest metropolis
Dubai is a young city. Back in the middle of the 20th century, in its place was a small village on the shores of the Persian Gulf, whose inhabitants earned money by mining pearls. Everything changed in 1966, when oil fields were discovered in these parts. It was then that investors flocked to Dubai from Europe and America, and labor from India and Pakistan. In the first seven years, the population quadrupled, and the village itself turned into a city – the capital of the emirate of the same name.
However, oil was not the main success factor for Dubai – there is not much of it here, only 5 percent of all UAE reserves. A more important driver was the emergence in 1985 of a free economic zone, within which preferential tax and customs systems operate, and foreign entrepreneurs can conduct business without the participation of a local partner. This policy has attracted a lot of investors to Dubai, including those in the real estate sector.
In the early 2000s, the city began to grow rapidly.
Today Dubai is Burj Khalifa, the tallest building in the world (828 meters), one of the most expensive Burj Al Arab hotels in the form of a sail, the largest Dubai shopping and entertainment center in the Middle East and the tallest wheel on the planet. reviews
“Over the past ten years, people’s perception of the Emirates has changed,” says Maxim Tyazhkin, managing partner at Dubai Realty. “If in 2010 entrepreneurs did not understand the potential of the UAE market and considered it a high-risk investment, then in 2022 Dubai has become a global brand.”
Over the past twenty years, the Dubai real estate market has experienced several ups and downs. A powerful rise occurred in 2002 – it was then that the world’s first artificial island, Palm Jumeirah, was being built, the villas on which were sold out in a few days, and long before the island was completed. The rise was followed by a collapse – during the global mortgage crisis in 2008, real estate prices in the Emirates collapsed three to four times. However, by 2015, demand began to recover, and in 2020-2021 it began to grow rapidly.
“The new real estate boom in the Emirates was largely facilitated by the coronavirus epidemic,” explains Alexey Slavuta, a representative of the Premium Realty real estate agency in Dubai. — During the pandemic, many countries closed their borders, while Dubai remained open. And people, including from Russia, flew here to relax and do business.”
“No one asks about the origin of capital”
Over the past six months, Dubai has been experiencing a boom in demand for housing, and largely thanks to the Russians. “June 2022 was a record number of transactions in Dubai — 9,000 transactions,” says Ekaterina Rumyantseva , founder of the Kalinka Group real estate agency . “In total, 25 thousand transactions were made in the second quarter, and this is also an absolute record, 10 percent more than in the first quarter of 2022, and 45 percent more than in the second quarter of 2021.”
June sales figures are available on the Dubai Land Department website , with transactions reaching $6.1 billion, a record for many years. The hype is marked against the backdrop of Western sanctions against Moscow : the UAE remains open to Russian business, and Russians, who have lost access to European housing markets, are investing in the Middle East. Moreover, the purchase of real estate in Dubai gives the owner the right to become a resident – to live freely in the country for a certain period of time, open accounts in local banks, pay lower taxes, and run their own business.
Dubai is a good location for business localization. Now all imports go to Russia through third countries, including through the Emirates. Many people think that the UAE is only about oil and tourism. But it’s not. The production of building materials, fabrics, medicines, perfumes, cosmetics and much more is developed here.
Alexander Balandin
Head of Sales at Premium Realty Real Estate Agency
“In Dubai, no one asks about the origin of capital, and everything is accepted as payment: cash, non-cash, cryptocurrency,” explains Ekaterina Rumyantseva. – In addition, there are very convenient schemes for buying real estate. Transactions can be made online – today the share of such sales is more than fifty percent.
According to the observations of realtors, the peak of activity in the Dubai real estate market fell on March-April 2022 – during this period, twenty to forty business jets flew from Moscow to the UAE daily. “It was the moment when representatives of big business and officials moved to the Emirates,” says Alexey Slavuta. “In the spring, real estate budgets could be five, ten, or thirty million dollars.”
Closer to summer, the structure of demand has changed. Middle business reached out to the East. Budgets were reduced to 300-700 thousand dollars, but there were more buyers. In just six months, 43 thousand transactions were recorded in Dubai for a total of 114 billion dirhams (1 dirham – 0.27 dollars).
“I have a floor in Dubai!”
“I bought a one-bedroom apartment in the Beachfront Emaar area for $700,000 – I wanted to profitably invest foreign currency savings and protect them from exchange rate fluctuations. I bought ready-made housing, so I personally flew for registration, it took two days. A week later, he rented it, signing a contract for two years. And now I am applying for a residence permit for the whole family and I plan to buy another apartment by taking a loan secured by existing property,” says Alexander, a businessman from St. Petersburg .
To date, there are about 300,000 Russian-speaking residents in Dubai, which is approximately 10 percent of the total population of the city. Mostly they are businessmen aged 40-50 and their families. Most of them are Muscovites, but many also come from St. Petersburg, Vladivostok , Yekaterinburg and Sochi .
“The most popular among Russian buyers are apartments, they account for 81 percent of sales,” says Ekaterina Rumyantseva. – In second place in terms of popularity of the villa – 18 percent of all sales. Important characteristics are the location in the best areas near the beach, proximity to parks, the quality of infrastructure and construction, the liquidity of the project.”
The transactions are different. Some buyers purchase one large expensive lot, others – several, but smaller and cheaper. Alexander Balandin says that in early spring, his agency sold a 2,000-square-meter apartment in one of the Palm Jumeirah penthouses for $17 million. But the sale of a small, 2,500 square meter building, which the new owner bought entirely and turned into an apart-hotel, was no less successful.
“And even now the story is popular -“ buy a floor ”, – Slavuta laughs. – This is when all available lots on one floor are redeemed in the building. From my point of view, this is wrong. With such a purchase, it may turn out that half of the lots are not liquid: not the most demanded area or the windows do not go in the right direction. But this is a very emotional purchase. People like to say: “I have a floor in Dubai!”.
Russians buy most of the apartments in order to subsequently rent them out.
By investing in real estate in Dubai, you can get from 5 to 10 percent of annual income. This is one of the highest rates in the world.
For comparison, in Europe, rental income is 2 to 4 percent per year, similar rates in the US and China. The so-called speculative investments are also beneficial – when a client takes an apartment at the stage of the beginning of construction, and sells it already in a finished building, earning on rising prices.
“One of our clients, having bought three lots in the Address JBR project at the beginning of 2022, made a profit of 750 thousand US dollars in six months. Against the backdrop of recent events, each of his objects has increased in price by 250 thousand, ”Maxim Tyazhkin confirms the trend.
However, after the COVID-19 pandemic, realtors have also noted another trend – Russians have begun to buy houses in the Emirates more often for living. “Before the epidemic, suburban villages were very cheap,” says Alexander Balandin. – Now everything is sold out at the construction stage. People want to have an “alternate airfield” where, if something happens, they can fly in and live in peace.”
Russian marina
In response to demand in the Dubai real estate market in 2022, supply increased by 130 percent compared to last year, Kalinka Group analysts say. In the first half of the year, 67 new public projects were registered and 17 closed sales projects were registered for special clients.
“On the new-build market, the most popular areas are: Business Bay, Downtown, El Merkadh,” says Ekaterina Rumyantseva. – It is also worth paying attention to the new Al Wasl district – the demand for the area was due to the implementation of such landmark projects on the market as Central Park, Safa One/Two and Canal Front. As for deals in the secondary market, they were mainly concentrated in areas such as Dubai Marina, Business Bay and JVC.
Dubai Marina is traditionally considered a Russian area. Prior to the start of active development in 2005, it was the outskirts of Dubai – part of the way had to go through the desert. Then one-room apartments were sold here for 50-100 thousand dollars, and many Russians bought them. Today, Dubai Marina has become one of the most fashionable areas of the city, with a canal, skyscrapers and a man-made bay that houses luxury yachts.
“In my opinion, Dubai Marina is good for a short stay or for singles. It is uncomfortable for families with children to live there – very dense buildings, like in the City. Therefore, today Russians are more likely to buy apartments here for renting out – Marina is in great demand among tourists, ”explains Aleksey Slavuta.
The neighboring area of Palm Jumeirah is also popular with Russians – a man-made island in the bay from a height resembles a palm tree, consisting of a trunk and 16 leaves, surrounded by a crescent of a breakwater 11 kilometers long. The area of the island is about six square kilometers, it is connected to the mainland by a 300-meter bridge. The breakwater is connected to the “top of the palm tree” by an underwater tunnel. Palma is built up with expensive houses, it is quiet, calm, there are no tourists, the sea is all around, but there is one drawback. When the area was designed, the traffic load was not calculated, and now there are constant traffic jams at the entrance to the bridge. Sometimes it takes an hour and a half to drive along the “palm tree”.
An alternative to Palma Jumeirah and Dubai Marina, experts call the currently developing Downtown and the adjacent Business Bay, where there are many offices and good apartments. Another promising place for investment is the Beachfront area, located in Dubai Harbor. With 27 Miami -style skyscrapers overlooking the sea and the beach, green roof terraces, and developed infrastructure, Beachfront is expected to become a city within a city where you can live without leaving it. Currently, the district is still under construction, the estimated date of delivery of the first towers is the second half of 2022, but the Russians are already actively purchasing lots here.
“The customer has 20 minutes to buy”
According to the growth in demand, prices for real estate in Dubai are also rising. “The average purchase budget in the apartment segment increased by 46 percent compared to last year and amounted to 1.2 million dirhams. The cost per square foot has increased by 26 percent over the year and amounted to 1,750 dirhams,” states Ekaterina Rumyantseva.
The cheapest apartment currently for sale in Dubai is a 42-square-meter studio in the Jumeirah Village Triangle for $86,920, according to Prian.ru, an online overseas real estate service. And one of the most expensive is the XLV Residence in the Emirates Hills area with seven bedrooms, a cinema room, a private wine cellar, an outdoor pool overlooking the golf course. Its starting price is $61,256,100.
At the same time, the local market has its own characteristics. The main thing is that transactions are concluded very quickly. “How are the Russians used to? Come, see the object and take two or three months to think about it,” says Alexey Slavuta. “That doesn’t work in Dubai. Here the builder puts the house up for sale and says, “Your client has 20 minutes to pay the down payment.” Clients do not believe, they say: “You are scamming us!” And they leave to think. And when they return, it turns out that the object was sold long ago.”
“A funny situation happened to us at the release of a new tower in the Beachfront Emaar project in June 2022 – more than 250 apartments were sold out in 30-40 seconds after entering the market,” Maxim Tyazhkin supports.
And in Dubai, it is allowed to pay for real estate with cryptocurrency.
Now many crypto investors are striving to transform their virtual assets into tangible and real ones. In the practice of our agency, there is a case when one client purchased an object for almost $ 5 million, and completely remotely, confirming bitcoin transactions from the beach
Maxim Tyazhkin
Managing Partner at Dubai Realty
Of course, not all customers can easily pay such large sums in full. But there are several schemes for acquiring real estate in installments.
The most common purchase scheme is an interest-free installment plan for a period of three to five years, which is offered by the developers themselves. The client pays a fixed amount of money in equal installments every three months for a year or two until construction is completed, then the developer hands over the keys, and then the balance is paid for another year or two. In this case, the owner can rent out the apartment and cover his loan payments at the expense of the tenant’s contributions.
Another possibility: since 2008, foreigners have the right to use mortgage loans. To do this, a potential borrower must have a resident visa, be officially employed or own their own business in the emirate.
Finally, in Dubai there is such a concept – rent-to-own. Under this scheme, the buyer and seller enter into an agreement that the buyer has the right to buy the property within a few years at the current market value, but at the same time can live in it. The rental payment is counted as a down payment.
“I would also recommend paying attention to those objects in which developers guarantee income,” advises Aleksey Slavuta. – Developers sign a five-year contract with buyers and take real estate management for this period, paying five percent per annum. And the buyer is no longer worried: to whom to rent an apartment? How to submit? Did the tenant move out or not? The management company simply sends money from income to the owner’s account quarterly.”
Not Dubai Alone
Dubai is not the only emirate where you can find promising real estate. Brokers are advised to take a closer look, for example, to neighboring Abu Dhabi, where the price of housing is two to three times lower. The atmosphere is calmer compared to Dubai with its ultra-modern architecture and bustling lifestyle. Therefore, visitors often prefer Dubai for recreation and leisure, and Abu Dhabi for permanent residence.
Another interesting location is Sharjah, where migrants traditionally settled. The city cannot be called the most prosperous, but Sharjah has tourist facilities, beaches, developed infrastructure, modern areas are being built. Here you can find interesting objects for investment. Most likely, Europeans will not rent housing in Sharjah themselves, but they can rent it out through a management company to Arabs, Indians, and Pakistanis. The check in Sharjah is lower, the potential profitability is higher, as well as the possibility of an increase in the price of renting an apartment.
Developers are now actively advertising real estate in Ras Al Khaimah, the only emirate where the construction of a casino is allowed in the UAE. But experienced realtors do not yet see potential in this location. The homeowner needs the investment to pay off in 7-10 years, and in Ras al-Khaimah, in 7-10 years, some movement will just begin in the real estate market. Until then, the apartment or villa will be idle, experts are sure.
Long game
Summer is low season in Dubai. The thermometer rises to plus 50 degrees. In such heat, it is customary here to start the day at five in the morning, sleep in the afternoon, and in the evening, with the onset of coolness, work until midnight. Business activity is reduced, including in the real estate sector. But in the fall, brokers are waiting for the market to break new records.
“Long-term investors in Dubai will only benefit from their investment. Especially those who will have real estate near the water, – says Maxim Tyazhkin. – In accordance with the plan until 2040, the development of the city will continue to go not along the coastline, but inland, which will automatically increase the value of real estate near the water. It is also worth keeping an eye on the possible opening of the second “palm tree” – Palm Jebel Ali. If it starts, then there is a possibility of repeated growth.”
Premium Realty experts, on the contrary, advise paying attention to the secondary market segment. “Since Dubai is a young city, secondary housing is not well developed here. Meanwhile, it can become a very profitable investment, – Aleksey Slavuta is sure. – Recently, for example, one client purchased a villa on Palm Jumeirah. The villa was built 10-15 years ago according to a standard project, which is no longer relevant. The client bought it for 15 million dollars, invested another 3 million in the reconstruction, and then sold it for 25 million. And this is quite a working story today.”
Finally, in Dubai, the demand for commercial real estate has appeared on the part of the Russians. So, right now, Slavuta is looking for a kitchen for rent for a businessman who organizes receptions.
Realtors are increasingly receiving requests for spaces that can accommodate shops, interior design studios or beauty salons. Experts explain that along with entrepreneurs, wives come to the emirate who also want to start some kind of business. And that means that the Russians probably expect to stay in Dubai seriously and for a long time.
