International Metropolis& Best Destination For Real Estate Investment In The World

Inheriting the historical symbol of the ancient Silk Road and following the principle of peace and development, China’s Belt and Road Initiative intends to actively establish economic partnerships with countries along the designated “Belt and Road” regions. It also intendsto jointly build a community of shared interests, shared futures and responsibility, featuring mutual political trust, economic integration and cultural inclusiveness. Encompassing over 60% of the global population, it will not only create new opportunities for the sustainable development of China’s economy, but also, more importantly, will change the political, economic and military landscape of the world.

Over the past few years, with the advance of the Belt and Road Initiative, the Middle East, the United Arab Emirates (UAE) and many other names are coming into our view.

When the Belt and Road Initiative was put forward by China in 2013, UAE was one of the Middle Eastern countries that actively responded to our call, and a founding member of the Asian Infrastructure Investment Bank (AIIB). Its advantageous location at an intersection along the Belt and Road area makes it a natural partner for jointly building the Belt and Road with China. The last five years have witnessed the consolidation of their cooperation in this field, and the strengthening of their economic and trade ties. In addition, UAE has remained China’s second biggest trading partner and biggest export market among Arab countries for many consecutive years; China is also UAE’s biggest trading partner.

Dubai, as a representative of cities in the Middle East, has also attracted the close attention of investors from all over the world.

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International Metropolis

Best Destination for Real Estate Investment in the World

For many people, Dubai is only a land of luxury and wealth.

However, in recent years, thanks to its strong performance in finance and trade, Dubai has successfully gotten rid of its dependence on oil, and created a diversified economic pattern.

(According to Dubai’s economic statistics in 2017, the petroleum industry only accounted for 1.7% of the economy, while large proportions were taken up by financial services, wholesale & retail trade, real estate &infrastructure, and other industries.)

Dubai—World-Class Financial Centre

According to the Global Financial Centres Index, in 2018, Dubai seized 15^th place in the ranking of global financial centers, above Paris, Geneva, Los Angeles, Luxembourg, Vienna, and many other metropolises.

So far, about 300 Fortune 500 companies have entered Dubai, including Deutsche Bank, Credit Suisse, Morgan Stanley, Merrill Lynch, China’s “Big Four” banks, Huawei, etc. More and more Chinese enterprises are also marching into Dubai, and launching sound operations there.

 (Downtown Dubai)

According to a report released by the well-known real estate consultancy,Cluttons,at the end of 2017, Dubai’s housing prices had seen growth rates as high as 5.19%. As a result, Dubai surpassed London as the best destination for real estate investment in the world in 2017.

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In 2019, Dubai is Still One of the Best InvestmentDestinations in the World

Here is some good news about real estate investments in Dubai:

Tourism Boom

According to Mastercard's 2018 Global Tourism Destination City Index (GDCI), Dubai has ranked in fourth place for four consecutive years. In 2018, the number of international tourists staying overnight in Dubai reached 15.92 million, and the hotel occupancy rate was 86.9%, with the highest spending power in the world.

In addition, it is estimated that Dubai International Airport will serve nearly 100 million passengers in 2020. The long-term prosperity of the tourism industry has yielded handsome dividends for the real estate market.

InfrastructureUpgrades

On January 1, 2019, Sheikh Mohammed bin Rashid al-Maktoum, Vice President, Premier and Chief of Dubai, approved Dubai’s public expenditure budget in 2019 to a total amount of 56.8 billion Dirhams(roughly amounting to 15.5 billion USD), intending to continue to transform Dubai into one of the most liveable cities in the world.

According to the Chief of Dubai, in 2019, Dubai will invest heavily in building World Expo facilities, and upgrading all kinds of infrastructure. This means that Dubai will become more attractive to investors, resulting in the rise of real estate value.

GDP Growth

According to the UAE macro-economic model analysis done by the Dubai Chamber of Commerce & Industry, supported by increased investment flows and personal consumption, the actual GDP growth of UAE in 2019 will reach 3.8%. To be specific, the actual GDP growth rate of the non-petroleum sector is estimated to be 4.1%, while between 2014 and 2018, it was only 2.8%.

In the next five years, the network of related business systems formed by transportation, telecommunications, construction, real estate, business services and tourism will provide strong momentum forUAE’s GDP growth.

Expo Dubai 2020

In 2020, the World Expo will be held for the first time in the Middle East/Africa/South Asia region. Expo Dubai 2020 will also be one of the grandest global events in the Arab world.

The event is estimated to attract more than 25 million visitors, about 70% of which will be foreigners. This is bound to provide tremendous impetus for Dubai's economic development.

Clearly, Dubai’s real estate market has very promising prospects.

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Dubai’sHousing Prices are half that of Shenzhen, but its Rental Yieldsare as High as 10%

Relative to other financial centers in the world, Dubai still has low housing prices. At present, the average housing price in downtown Dubai is 30,000~50,000 RMB/m², and in surrounding areas it is about 20,000 RMB/m². Dubai’s housing prices are roughly one sixth of that of Hong Kong, and half of that of Shenzhen.

However, the rental yield of Dubai is surprisingly high! According to statistics, Dubai has an average annual rental yield of about 7.8% in ordinary areas, and a yield as high as 10% to 15% in hotspots. According to the rental data on metropolises in the world in 2017 released by Airbnb, Dubai ranked second worldwide, and demonstrated a rising trend.

(Average Rental Yield Comparison; Data Source: PropertyMonitor)

According to statistics released by Leyoujia, Shenzhen’s rental yield in 2018 was below 2%. Clearly, in this regard, Shenzhen lags far behind Dubai.

However, Dubai is similar to Shenzhen in that 90% of its population of Dubai are migrants, and the large number of migrants ensures a stable rental yield.Its room occupancy rate can reach as high as 87%, according to official data released by the government of Dubai.

(Palm Island, a Well-Known Luxury Villa Area in Dubai)

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Completed Hotels in Core CBDs

Short Payback Period and Immediate Return

Here Park Regis, a luxury hotel in a CBD office building in Burj Khalifa District, is taken as an example for illustration. Besides a guaranteed minimum fixed rent, there is also an annual dividend of 95% of hotel revenue; the comprehensive rate of return on investment can reach between 13% and 20%. (According to a conservative estimate by HDR, the largest hotel rating agency in the world ^①, the expected net return will reach 20.2% in the fourth year, and 20.96% in the fifth year.) As a completed project, the hotel will be opened to business in April, 2019, and there will be immediate return on investment then, so your funds won’t be tied up for nothing. There is also a freehold, which is inheritable and transferrable without having to pay any tax. In addition, investing in the amount of one million dirhams (equivalent to 1.8 million RMB) gives permanent residency to three generations of one family.

[Note ^①: According to Mastercard data, in 2018, Dubai had a hotel occupancy rate of 86.9%; HDR measured a conservative occupancy rate of 74.6%.]

That is to say, recovering one’s costs within seven or eight years is quite easy. In contrast, it takes 50 to 60 years to recover the cost of a house, not to mention the absence of a freehold and the uncertainty of rental yields.

(Park Regis, a Luxury Hotel in Burj Khalifa District)

Besides high rental yield and low housing prices, purchasing real estate in Dubai also has the following advantages:

1) Freehold, and No Tax

Real estate in Dubai is freehold, and is inheritable without inheritance tax; there is also no capital gains tax or rental income tax.

2) Permanent Residency Gained from Purchasing Real Estate

Purchasing real estate in Dubai brings about a freehold, and investing in real estate in the amount of one million dirhams (equivalent to 1.8 million RMB) gives permanent residency to three generations of one family. This adds to the appeal of Dubai to investors.

3) Stable Exchange Rate and High-Risk Resistance

Dubai’s currency (dirhams) has a stable exchange rate with the USD, and has remained stable at around 3.667 for the past two decades, so it is equivalent to dollar assets. Compared to the RMB in continuous depreciation, a stable exchange rate with the USD can no doubt inhibit currency inflation and guarantee asset hedging.

4) Flexible Payment

Investors intending to purchase real estate in Dubai can apply for loans (50% at least, which is unavailable in most countries) at a low interest rate, and easily make repaying loans with rent a reality.

5) Refined Decoration and No Shared Residential Area

In Dubai, the housing area means the actual area used, without shared areas; in addition, most houses there are finely decorated, and most apartments are fully furnished.

6) International Education

There are 511 international schools in UAE, the largest number in any country. In terms of tuition, it is cheaper to go to school in Dubai than in China.

7) World-Class AccompanyingFacilities

There are also all kinds of facilities in Dubai, like the highest tower and the largest shopping center in the world, an international airport, international schools, international medical care, etc. Investors can enjoy top-end luxury life in Dubai.

8) Openness and Safety

As the second safest city in the world, Dubai has no foreign exchange controls, no purchase restrictions, and no political risk.

9) Good News for Chinese Investors: Visa-Free Entry.

 (City and Port of Dubai)