09 - 11 Dec 2018

Dubai realty gets Chinese boost

A rising number of Chinese players are involved in thecity's property marke

UAE real estate, particularly that of Dubai, is steadilygaining interest among savvy Chinese investors. This extends to thebrick-and-mortar assets, contracting industry as well as construction finance.

The Chinese were the fourth most active real estateinvestors in Dubai in the first half of 2017, according to consultancy KnightFrank.

A recent Knight Frank report rated the UAE as having thethird highest potential among 67 countries to make use of China's 'Belt andRoad Initiative'. It identified the UAE as the 'Hub of the Belt'.

Chinese contractors have a big presence among the top 5contractors in the UAE. They also provide construction finance. The China StateConstruction and Engineering Corporation ranks as the second biggest contractorin the UAE with projects worth of almost $3 million. It has 16 ongoingprojects.

Knight Frank estimates that of the total contract value offuture projects in the UAE (both projects in the design and execution phasefrom 2018-20), Chinese firms account for 6 per cent of total value ofcontracts. In Dubai, this is slightly higher at 7 per cent and from 2019 to2020, it is expected to increase from 7 to 9 per cent.

"There are an increasing number of Chinese buyers,however, it's important to note that we're not going from a low figure ofChinese investors to a high one. There has always been considerable Chineseinvestment in Dubai real estate, it's just that at the moment, we're seeingmore coming in than in recent times. If you walk in to any of the major developers'sales centres, you will see a large amount of Chinese buyers looking to make apurchase," says Lewis Allsopp, CEO, Allsopp & Allsopp.

"In the past two decades, more than 8,200 real estatetransactions have been completed by Chinese buyers and roughly one quarter ofthose transactions took place in the past two years alone, bringing in morethan Dh3 billion," explains Jason Hyes, founder and CEO,LuxuryProperty.com.

PH Real Estate estimates that it has seen a 10 to 15 percent increase in the number of Chinese buyers approaching it.

"Chinese buyers accounted for about 3 per cent of allsales in Dubai in 2017. They are taking a lot of construction projects andbringing in a lot of financing. They are bringing in a lot of their own peopleas well for these projects. As those people tend to get familiar with Dubai,they will want to buy homes for themselves. That trend is bound to grow,"forecasts Craig Plumb, head of research, JLL Mena.

Identifying China as a sizeable target market, most Dubaidevelopers have tie-ups with Chinese brokerages in mainland China and theyspend a lot on marketing on roadshows and exhibitions in China.

"The larger developers in tune with the needs of theirChinese clients. Most developers now have either a Mandarin-speaking departmentor at least have a marketing strategy geared towards attracting new Chinesebuyers," reckons Myles Bush, CEO, PH Real Estate.

"Emaar, for example, has launched a Chinese website tomarket its properties and is offering special incentives to investors forChinese New Year. The government has also launched its own initiatives topromote Dubai properties to the Chinese market. Last year, the Dubai LandDepartment entered into an agreement with the marketing company behind one ofChina's leading property portals to promote Dubai property in China,"Hayes points out.

There are Chinese agents stationed in Dubai as well."We work closely with a few Chinese agents, one of whom had 20 clients flyin from China last week and who between them bought 13 properties in oneweek," says Allsopp.

With Dubai being one of the few global cities whereinvestors can enjoy 8 to 10 per cent on their real estate returns, the Chineseare likely to continue to inwardly invest into the market.

"Chinese buyers are smart investors and they are veryaware that it's a buyers market. The majority of Chinese clients we deal withare looking for high-performing rental returns rather than trophy assets. Anexample of this over the past week was when my team brought in a commercialfloor for sale in DIFC that is currently returning a 9.5 per cent yield; withinone day of advertising, seven Chinese buyers called us for moreinformation," observes Bush.

"Chinese buyers are savvy and know what they want. Inthe majority of cases, they are investors and cash rich. They are looking inaffordable projects, good deals, up-and-coming areas, top locations, etc.Generally, they are looking to tick the boxes of most investors, something thatis popular, will provide a good return, should see good capital appreciationand offer a good exit strategy if needed," concludes Allsopp.

Source: Khaleej Times/Deepthi Nair

Published: 02/12/18