Dubai to overtake London as top pick for wealthy GCC investors

Dubai’s property market is set to overtake the international destinations of London, New York and Singapore as the top choice for the GCC’s wealthiest investors next year, a report has found.

The region’s high net worth individuals ($1m-plus) ranked London in second place alongside Paris and Doha in Cluttons’ third Middle East Private Capital survey, while Toronto made a surprise entry at number three.

For this year, London remains the top destination outside the Middle East for Gulf investors, cited as a top three market by 17 per cent of the 127 millionaires interviewed by Cluttons, ahead of New York (16 per cent) and Singapore (13 per cent).

This is despite London property values reaching as much $4,000 per square foot, roughly three times the price of high-end apartments in Manhattan and Singapore’s Marina Bay.

Price softening within the Dubai property market was cited as the top reason for this increase in attractiveness, alongside the upcoming Expo 2020.

Murray Strang, head of Cluttons’ Dubai base, said that the expo’s potential for capital growth and higher yields in the market means that “people now see really good value for money in Dubai”.

He added: “I think that’s why some people are calling the bottom of the market in the near future, and I think we’re seeing a lot of GCC high net worth individuals who are now seriously looking at Dubai, given that prices have become more attractive over the past year or two.”

London’s property market has experienced a slowdown in 2016 after witnessing capital growth of 70 per cent over the past seven years.

Following the vote for Brexit and the slump in sterling value, investors who hold their wealth in dollar pegged currencies such as the dirham saw hundreds of thousands of UK pounds wiped off their assets.

As a result, London property is now 34 per cent cheaper than it was nine years ago, according to Cluttons head of research Faisal Durrani.

He said: “If you look at the upper echelons of say GBP2m to GBP5m, your Brexit saving is close to half a million dollars. For buyers in the Gulf whose pegs maintain a fixed rate against the dollar, that is a very significant saving, which is why we have seen interest in markets such as Belgravia and Chelsea following Brexit with Kuwaiti and Emirati investors taking full advantage of the currency situation.

“The flipside is that other buyers are saying there’s a potential correction in the market in London and there is potential for sterling to fall further. So there are those who want to take the opportunity and enter the market and those who want to wait and see how it goes.

“On budgets, the vast majority [of people surveyed] said they would spend between a $1 and $1.5m on a global property asset. From an equity perspective, it starts to make more sense; for high-net worth individuals, $1m is not a lot of money. Buyers from the Gulf tend to club their wealth together in unofficial funds.”

He added: “We thought there would be a high likelihood of people liquidating their international assets, but actually it has been the opposite. Upon reflection, with the currency swings, it is unlikely people will sell unless they really have to, so people will continue to hold.”

Meanwhile, Doha’s rise in the Cluttons’ ranking was attributed to growth potential linked to the FIFA 2022 World Cup in Qatar.

Paris’ attractiveness to the Qatari market through a government tax treaty and the recent purchase by the Qatari Investment Authority of a luxury retail complex on the Champs Elysee boosted its investment probability.

Toronto was the North American city to enter the consideration list for next year, coming in third place. Investors cited the Canadian city’s high living standards and education institutions as factors in their choice.