Looking at an overview of the global real estate market in the past eight years, the strong purchasing power of mainland Chinese investors has led to healthy investment flow into countries, such as the US, Australia, UK, New Zealand; it has also led to an uplift in Southeast Asian market in the past two years. With the advantages of quality education, medical care and immigration, European and American countries have attracted a large number of Chinese buyers to invest; Southeast Asian countries have attracted Chinese investors due to the convenience of its geography, affordable prices, and tourist attractions.
In the last two years, however, we have seen a large number of Chinese investors entering the Dubai real estate market. According to the recent Dubai Land Department (DLD) report, investments by Chinese nationals accounted for AED 1.7 billion ($462.8 million) in the first three quarters 2018. This figure makes them the sixth highest nationality investing in the emirate during this period, compared to ranking fifteenth in 2017.
With almost 100K daily visits to the platform, dubizzle Property has also identified that Chinese nationals were among the top 20 nationalities searching for properties on the platform in the first three quarters of 2018.
The number of Chinese expats in Dubai has increased by 53% over the last five years, with around 230K Chinese nationals currently living in the emirate and around 4000 Chinese companies with a presence here.
So what are the drivers behind this rapid growth in investment by Chinese nationals?
Following the visit of Chinese President Xi Jinping in July 2018, the ties between China and the UAE became even stronger, particularly from a trade, culture, tourism and investment perspective. With the UAE government issuing a number of preferential policies for China, such as listing Chinese as the third major language in more than 100 Dubai schools, and Emaar plans to develop the Middle East’s largest Chinatown in the retail district of Dubai Creek Harbour, Dubai has become a second home for Chinese nationals.
The key drivers behind this rapid growth can be attributed to:
1. The Chinese government implementation of the “The Belt and Road Initiative”. This initiative encourages more Chinese enterprises to set up business in UAE, so the demand for offices and staff accommodation is increasing accordingly.
2. With the current trend of the China stock market and property market, domestic investment opportunities have reduced. This is encouraging upper-middle-class Chinese nationals to search for new investment opportunities overseas.
3. The Depreciation of the Chinese Yuan (8.8% drop in last 3 months) has accelerated the pace of Chinese investors' allocation of US dollar assets overseas, to balance their assets in different currencies.
4. Advantages of the Dubai real estate market are in line with the investment expectations of Chinese investors. Factors such as freehold ownership, high rental yields, affordability and tax-free investments are very appealing to them.
What are Chinese investors interested in?
Chinese investors are interested in both ready and off-plan properties. Location, annual yield, and selling prices are the three of the key factors considered when making purchasing decisions.
Downtown Dubai, Greens, and International City are the three most popular areas for Chinese investors to buy ready properties.
Chinese investors are well versed in the importance of location. It determines the value and the safety of the investment as property in prime areas of the city not only have room for appreciation, but can also maintain their value during tough market conditions. At present, the average price of resale properties in Downtown Dubai is between 1700 AED/SQFT and 2200AED/SQFT, which is equivalent to one-fourth to one-sixth of the selling price of Downtown Shanghai, China. For Chinese investors, this price for a fitted flat with a free parking in the heart of Dubai is very cost-effective. The yearly yield in Downtown Dubai is around 6% to 7%, slightly lower than the annual average yearly yield of 8% in Dubai, but because of the above two advantages, Chinese buyers accept this.
Most large Chinese companies are located near the Greens, so this area is a popular choice for Chinese investors. The proximity to large enterprises (such as Internet City and Media City), public transport, as well as the beautiful community environment, family-friendly facilities and amenities including schools, supermarkets, and restaurants, make this area very attractive and highly occupied. The average selling price of the Greens community is between 1200AED/SQFT and 1500 AED/SQFT. The yearly yield in Greens is around 8%.
Home loans and mortgage offers from local banks, as well as the appeal of saving on rent while living in Dubai and having an asset to rent out in the future, encourages Chinese residents to invest in properties. In addition to this, to save on rental fees, most major Chinese corporations are preferring to buy A-class offices in prime locations as well.
Dubai's most famous Chinese gathering area is the International City next to Dragon Mart. Dubai's Dragon Mart is one of the largest trade centers in MENA, jointly created by the Dubai and Chinese government. It is specially designed for Chinese businessmen to operate trade business here. In addition, many Chinese restaurants, clothing stores, and supermarkets have been opened here, which have provided daily necessities for Chinese people living in Dubai. Therefore, business owners and employees working in Dragon Mart, including other Chinese nationals who want to live a convenient life, will choose to buy or rent an apartment here. The average selling price in the international city is 700-980 AED/SQFT and the yearly rental yield is around 9%-10% which ranks No.1 in Dubai.
Dubai Creek Harbour, Meydan, and Madinat Jumeirah Living are Top 3 areas for Chinese investors to buy off-plan properties.
DUBAI CREEK HARBOUR
Dubai Creek Harbour is a new world-class development by Emaar Properties and Dubai Holding, and Chinese investors have already become the No.1 investors in this area. This huge development has many world-class facilities and will be home to key attractions in the emirate including the Creek Tower and Dubai Square. Emaar’s development track in Dubai, including Burj Khalifa and whole Downtown area, instills confidence in Chinese nationals considering investing projects by the developer. Besides, based on their investment experience in major cities in China, investors are confident that such ‘city hub’ developments will provide good returns in the near future.
Meydan is also one of the preferred areas for Chinese to buy off-plan given its close proximity to Downtown Dubai. Major developers including Medyan and Sobha, have built luxury villas and apartments with the large scale of the landscape in this community. With key features and amenities including the Dubai Water Canal and Medyan One Mall, as well as several schools planned to open in the area, Chinese investors are showing high levels of interest in this area.
MADINAT JUMEIRAH LIVING
Madinat Jumeirah Living is a new residential development by Dubai Holding, located just behind Burj Al Arab. This is the only freehold development in the Jumeirah area, with a traditional Arabic-style design and easy access to all five-star hotels nearby. UAE-based Chinese investors have shown interest in this development and believe the prime location will provide future appreciation and rental income.