The Russian Wave is over. What to Expect in the UAE Real Estate Market?

The headlines in leading Russian and foreign media outlets, including RBC, Forbes, and Bloomberg, recently proclaimed the end of the Russian real estate boom in the Arab Emirates. These headlines raised concerns about a decline in Russians’ interest in property investments in Dubai, dubbing it as the ‘Arab trap.’ Let’s discuss whether the Dubai real estate scenario is as alarming as portrayed and explore the future of the real estate market in the Emirates.

Is the ‘Russian Wave’ Over for Good?

Indeed, there has been a noticeable decline in demand from Russian buyers for UAE real estate. The reasons behind this decline are rather apparent. The weakening of the ruble has led to increased costs for purchasing properties and making installments for off-plan projects. Additionally, the primary segment of demand has been largely satisfied — those intending to buy property have already done so, resulting in a less urgent market. It’s unlikely that such a surge in demand will recur, inevitably signaling an anticipated market correction.

Who Will Shape the Next Market Trends?

It’s a misconception to believe that the Emirates’ real estate market solely hinges on Russian demand. While Russian interest has been influential over the past 1.5 years, historically, the primary purchasers of UAE properties have been Indians, Brits, and Europeans, and their interest remains intact. There are indications that fresh market dynamics may arise from China, potentially igniting a new phase of growth, perhaps even stronger than before.

There’s a strong foundation supporting these expectations. With China relaxing post-pandemic restrictions and actively seeking investment avenues, there’s a significant interest, despite the inherent challenges associated with purchasing foreign assets and transferring capital out of China.

Moreover, investors from the United States and Canada are eyeing Dubai’s real estate as an alternative to high-tax environments in their home countries.

Thus, the fundamental demand from India, the UK, Europe, coupled with the possible emergence of Chinese interest, could elevate the market once again after some time.

Current Market Status

The market has entered a phase of stagnation — neither growing nor declining. It’s a usual scenario, a recuperation phase following the previous rapid expansion. Apart from the decline in Russian demand, ongoing global geopolitical issues, such as the conflict in Gaza, have also played a role, causing buyers to adopt a cautious approach while observing unfolding events.

Simultaneously, certain projects witness sustained high demand. For instance, the launch of the Haven project by Aldar Properties saw a complete sell-out within two hours. A similar scenario unfolded during Emaar’s launches. It’s interesting to note that while the market seems to wait, real estate investments continue, particularly in projects by trusted and established developers.

Future Market Prospects

The real estate market operates in cycles, where rapid growth is typically followed by a period of correction. However, unlike a roller coaster, unless a global crisis intervenes, the market will likely progress in a more controlled manner. It could be propelled by external factors like Chinese, Indian, and European demands or undergo a natural correction, an expected phase in its evolution.

The evolving landscape within the real estate market may encounter another significant factor. Over the past couple of years, numerous projects were launched with installment schemes. In the coming year, these installments will come due, posing challenges for buyers who initially planned for swift resale, an option that did not materialize. As a result, some buyers might lack the necessary cash reserves to meet these impending payments. Therefore, unless there’s an upswing due to Chinese investments, there could be an opportunity for investors to acquire properties at prices comparable to those of two years ago. The emergence of defaulters might offer genuine investors a chance to acquire properties at their original or even lower prices.

The Concept of the “Arab Trap”

Forbes titled its article on the waning interest of Russian buyers in Emirati real estate as “The Arab Trap.” In reality, there’s no deliberately set trap. To safeguard investments, one needs to adopt a prudent approach: diversify risks, allocate funds wisely if you make installments, and select projects judiciously.

Advice for Current Investors

For existing investors, it’s imperative to assess their financial standing sensibly. If meeting regular payments appears impossible, it’s prudent to consider selling the investment property. In less critical situations where managing the payments is feasible, it’s advisable not to panic, rush, or make decisions driven by emotions that could result in irreversible mistakes.

What About Selling Your Property and Depositing Money?

Selling property and holding the proceeds in a bank account might present challenges. Depositing money in a Dubai bank might prompt the bank to suggest alternative investment options since your funds may not yield profits for them by merely being held. The account could potentially be ‘frozen,’ allowing withdrawal but restricting account usage. Thus, if circumstances permit, retaining funds in real estate is a more reliable approach to navigate through the economic downturn and await a subsequent market surge.

In case of a ‘freeze,’ having two accounts in different banks is advisable as a precautionary measure. If one account is closed, having such a history might hinder opening a new account. Therefore, it’s wise to prepare in advance. Encouragingly, the scenario regarding account openings for Russians is starting to improve. Positive decisions are being made not only by Dubai banks but also by international ones, hinting at a favorable shift.

The Arab “Switzerland”

Dubai’s decade-long experience portrays the Emirates as a sort of “Switzerland” in the Arab world. Their neutral stance during geopolitical events emphasizes their ambition to be a safe haven. The recent introduction of the golden visa in the UAE signifies their inclination towards such a policy and indicates their aspiration for further development in this direction. Hence, rather than reacting impulsively, it’s advisable to rationally explore available opportunities. If you’re thinking about investing in real estate, obtaining a visa, establishing a business, or relocating your family for permanent residence in Dubai, our team is here to help with all these aspects.