A 10-year UAE expat residency for professionals and 100 per cent foreign ownership of businesses outside as well as inside free zones, are two new initiatives widely welcomed by the real estate sector.
While both announcements may boost property investment, with only a limited number of individuals set to be affected by these changes - are they such a big deal?
The devil is in the detail. Expats will have to wait and see exactly how these measures are actually implemented - now promised before the end of the year - before it is possible to fully assess their likely impact.
Of course, many expat professionals have already chosen to invest in UAE property, so it probably will not change their outlook at all. Then again, those worried about settling their families and taking out a mortgage may now decide to take the plunge, and that’s a plus for the market.
Yet even for higher-earning professions, buying a home is a major decision. I can remember the agonies I went through when first buying a house in London at the bottom of the worst post-war recession in 1993.
It did not help that my publishing colleagues thought I was completely mad to buy after three years of falling prices. Fortunately, I’ve always been a bit contrary about investments and thought such negative sentiment was exactly what you would expect with prices so low.
That proved to be true. Some years later I sold that house and used the profit to start a website in the newly-formed Dubai Media City free zone - in fact I think I was the first-ever company to actually sign up in the DMC.
Even back then, Dubai offered 100 per cent ownership of companies to foreign investors like me. Will allowing ownership outside free zones make much difference?
It could do if takeovers of local companies by foreign firms is allowed. But otherwise most companies that wish to operate in Dubai already have few restrictions; even education and healthcare have their own free zones.
All the same for most people buying a house with a large mortgage when prices are low - as they are now in the UAE - is definitely the best investment you could make.
Stock markets might perform better but you never get to borrow so much to invest in the first place with shares, so the compounded returns are always smaller; unless you really hit the jackpot and buy the next Apple or Facebook in their early days.
Luckily for UAE investors, as I have opined in this column before, local house prices are at an attractive entry point in the price cycle now.
As one of the world’s largest oil producers, the fortunes of business and house prices here closely track movements in the oil price, albeit with about a six-month time lag.
Therefore, when oil prices tumbled a few years ago, house prices also entered a correction phase. But today oil prices have recovered from around $30-a-barrel to $80, and the recent unilateral abandonment of the Iran nuclear deal by the United States has made even higher prices a realistic prospect.
...[ Continue to next page ]
Share This Post
