Increased participation of the end-user/occupier segment will create a mature property market
The recently announced 10-year residency visa and 100 per cent foreign ownership provision in the UAE has triggered conversations around the possible impact this would have on the property market. Based on the information released so far on the new visa system, specialist categories (such as professionals in medicine, sciences, research and technical fields) as well as students with exceptional grades would stand to benefit from the extended visa. Additionally, investors looking to set up a business will no longer need to engage an Emirati sponsor to operate companies in the country outside free zones. Instead, 100 per cent ownership by foreign nationals will be introduced.
The details of the categories of residents and businesses to be included in the new system as well as the related charges are expected to be released in the latter half of this year. Until then, the direct impact on the real estate market is difficult to assess.
Historically, the UAE, as well as other Gulf states, have been a ‘transient‘ residence for white-collar expatriate workers, who had until recently been attracted by the competitive salaries fuelled by oil-fed economies against an environment of zero to limited taxation. Following the global financial crisis a decade ago, and more recently the protracted oil price slump, the rules of the game have changed.
The property market in the UAE is closely linked to business sentiment and the related impact on jobs, which in turn drives housing demand, the holy grail of real estate development and investment in the country. Investor groups for residential properties in Dubai have remained largely unchanged over the last three to four years, with Emirati and Saudi investors leading the tally, followed by Indians, Pakistanis and the British.
In other emirates, the buyer profile is more heavily weighted towards locals and GCC/non-GCC Arabs. Superior yields compared to traditional real estate destinations like New York, London and Singapore, as well as familial/business ties to expatriates from these source markets based in the UAE, has driven property market demand in the country.
This could also enhance long-term investment by skilled expatriates in the local economy as opposed to remittances to their home countries, which in 2017 alone was Dh164 billion for all foreigners, and during Q1 2018 stood at Dh43.5 billion, 17 per cent higher than the same period last year. The proposed visa system is a step in the right direction and the true impact will become clearer when the details are released later this year.