The allure of the UAE, particularly Dubai, remains unshaken as the favoured destination for Chinese real estate investors in the Middle East, despite facing intense competition from rival markets.
While the pace of Chinese investment in the UAE real estate sector has been somewhat tempered due to the surge in competing markets, the Gulf nation remains optimistic about drawing in buyers from Asia’s largest economy. This optimism is fuelled by the substantial investment potential and a surge in inquiries.
Ernst & Young’s latest report reveals compelling figures for the first quarter of 2023, indicating that China’s overall direct investment (ODI) has soared to $40.5 billion, marking an impressive year-on-year increase of 18 percent. Within this substantial sum, the real estate, hospitality, and construction sectors have carved out a significant share of 26 percent, amounting to $918 million. Notably, this figure reflects a remarkable YoY surge of 191 percent.
The report emphasises that China’s steady economic progress in the first quarter, coupled with a drive for high-level openness, is poised to further propel outbound investments.
Juwai IQI Co-Founder and Group CEO, Kashif Ansari, observes that Chinese affluent households have amassed a staggering $886 billion in surplus savings since 2019. With travel restrictions easing and weaker economic growth in many domestic cities, Chinese investors are redirecting their substantial resources abroad, including towards the UAE.
Statistics highlight China’s extensive investments in various regions, with $6.1 billion funnelled into the US and nearly half a billion into Australia for residential real estate in 2022. In the current year, Australia leads in buyer inquiries, followed by the US, Canada, the UK, and Thailand. The UAE stands as the top Middle Eastern investment destination and ranks sixth globally, with Dubai standing out as the paramount choice for Chinese buyers in the region.
Chinese investors are seizing opportunities, acquiring four-bedroom townhouses for $3 million in Sydney and investing in opulent communities like Palm Jumeirah in Dubai. Juwai IQI’s Kashif Ansari predicts Dubai’s market to experience swift growth this year, underscoring its appeal to Chinese buyers.
While the UAE is poised to benefit from substantial Chinese investment, it contends with formidable competition from China’s domestic market and other global players.
Pamela Ambler, Head of Investor Intelligence & Strategy, Asia Pacific at JLL, notes that China’s Q1 2023 capital activities were primarily concentrated domestically, with a staggering 90 percent of the $4.9 billion investments deployed within the country. Overseas investments are largely captured by Europe and the US. Ambler also points out that the Q1 2023 figure represents only half of the $9.7 billion invested during the same period in 2019, yet there is a notable surge in inquiries and proposals.
Fadi Moussalli, Executive Director of International Capital Coverage at JLL, anticipates a favourable shift as relaxed travel restrictions facilitate increased investment momentum, buoyed by the cessation of the zero-COVID policy.
Imran Farooq, CEO of Samana Developers, echoes this sentiment, projecting a gradual buildup of Chinese investors’ contributions to the market over the next six to nine months.
Juwai IQI’s Kashif Ansari aptly likens the transformational process of redirecting significant investments across numerous countries to turning an aircraft carrier—a time-intensive endeavour.
Though robust transactional data on the surge of Chinese investments in the Middle Eastern real estate sector is limited, the UAE remains strategically positioned.
Farhad Azizi, CEO of Azizi Developments, attributes this advantageous position to the UAE’s free trade agreement with China, simplifying business operations, and a forthcoming free zone tailored for China-based companies offering enticing incentives.
Initiatives on the legislative front, including reforms to facilitate family office setups, exemplify the UAE’s commitment to fostering an environment conducive to foreign investment, as highlighted by Christine Li, Head of Research, Asia Pacific at Knight Frank.
Samana’s Imran Farooq underscores the steadfast commitment of Chinese investors despite a preference for greater market openness, emphasising their continued engagement in business activities.
Original article reference: ZAWYA.
