Dubai is emerging as the favourite Middle East destination for overseas property investors looking to boost their income from real estate.
Investors are taking a more strategic approach to balancing their portfolios, says the 2012 Middle East and North Africa (MENA) Real Estate Investor Sentiment Survey from global real estate services firm Jones Lang La Salle.
“Property remains popular for investors in the Middle East,with Dubai in particular attracting interest” says Property International
Jones Lang La Salle’s Gaurav Shivpuri, who heads MENA Capital Investments, said: “Investors are moving from a ‘high capital growth focused land ownership’ approach to a more strategic one and buyers are keen to pay extra for an asset that is well-located and has reliable income.”
He said reducing risk and moving to investments generating income is helping increase the number of real estate transactions.
Dubai is a preferred market
Property has given a better returns for less risk than alternative investments, but the survey reveals that investors are divesting other assets for those generating an income – especially those bringing regular returns.
The report also highlights investors perceive Dubai as a preferred market for several reasons:
- Dubai’s improving economy is pulling up property values that dipped following the global downturn
- The Emirate has the best property rental values and the largest number of suitable homes for investment in the region
- Dubai is politically stable and has a well-developed infrastructure
The report’s other key finding is that investors are switching from owning land to property which brings an income.
Buyers seek smaller homes
Unlike western property markets which are dominated by ‘institutional’ investors, the report says that the MENA real estate market is dominated by family groups and private individuals and they are mainly buying homes, which is a trend likely to continue over the coming years.
Though with the future for property far from certain, the report says investors are avoiding placing large amounts of equity in to deals and are wary of borrowing too much money.
The result is buyers are opting for smaller, cheaper homes, while larger deals are attracting fewer investors.
Location is becoming increasingly important, while sustainability is a relatively new idea for Middle East investors and few buyers are willing to pay extra for sustainable buildings.
To sum up, the firm’s Craig Plumb explained: “At a macro level the local real estate market is more optimistic this year, buoyed by high oil prices, improving economic performance and greater stability.”