China’s wealth becomes an X factor in Dubai realty

These investments and more can make UAE the hub of China’s Belt and Road Initiative.

The China effect on Dubai’s real estate market is only going to get bigger. High net worth Chinese buyers are looking at a selection of projects from Dubai’s leading developers to see what sort of exposures they can commit to.

Over the last weekend, the Beijing-headquartered wealth management firm Letou Group hosted a high-profile event in Dubai for up to 200 wealthy Chinese investors or their representatives to offer a snapshot of Dubai’s off-plan projects. And Letou, which already has an office in Dubai, could be considering some sort of MoU (memorandum of understanding) with Damac that could see these investments being channelled into the developer’s ongoing projects portfolio, sources said. (No official confirmation was available from Damac about such an alliance.) Elsewhere in Dubai, buyers from China have been busy acquiring property assets. Based on the Dubai Land Department Data, in the 18 months to June 2017, they pumped in Dh3.14 billion from 2,177 transactions.

“At this point, Chinese investors were ranked the eighth most active investor by number of transactions out of 217 nationalities,” said Taimur Khan, senior Analyst at Knight Frank, the real estate consultancy. “In 2017 Chinese investors remained firmly in the Top 10 most active nationalities.

“With the Dubai Property Show and property week being held in Shanghai in May, we may see greater activity from Chinese investors in 2018.”

But the Chinese investor push into Dubai realty should be seen as part of a bigger play. Knight Frank issued a report Tuesday that rates the UAE as having the third highest potential among 67 countries to make full use of China’s “Belt and Road Initiative”. In fact, UAE could well be the “Hub of the Belt”. (The Belt and Road Initiative aims to connect the world’s second largest economy with the 67 countries through a series of interlinked trade and infrastructure projects. It would mean billions of dollars being pumped into local economies, with China’s public and private wealth paving the way for that.) “The GCC member nations are eager to transform their economies to reduce over-dependency on oil and gas,” said Khan. “This provides fresh prospects for Chinese investors, especially in the real estate, high-tech and energy sectors. Over this period, the UAE has become the favoured destination of Chinese capital.”

Even outside of any Belt and Road led initiatives, prospects for high-profile Chinese involvement in the local construction sector have never been better. “The current snapshot of data shows that of the total contract value of future projects in the UAE (both projects in the design phase and in execution phase from 2018-20), Chinese firms account for 6 per cent of total value of contracts,” said Khan. “In Dubai, this is slightly higher at 7 per cent and from 2019 to 2020 it is expected to increase from 7-9 per cent.”

And it needn’t be just on the brick-and-mortar side that China is unleashing its influence on the realty and construction sectors. In September last, Five Holdings (earlier known as SKAI) had gone in for a Dh1.1 billion syndicated financing, which involved four Chinese financial institutions out of the seven that took part. Those funds were for Five’s upscale hotel projects in Dubai.

China’s Belt and Road Initiative explained

Launched in 2013, the Initiative aims to create new trade routes, economic links and business networks. Six economic corridors were identified from China to Central and South Asia, the Middle East and Europe (the Silk Road Economic Belt) and, along a maritime route, from Southeast Asia, Oceania to the Middle East, Africa, and Europe (the 21st Century Maritime Silk Road).

It seeks to cover 69 countries and encompassing around 60 per cent of the world’s population and 40 per cent of global GDP, through a collection of interlinking trade deals and infrastructure projects.

Editor's Note: This article was originally published in Gulf News on Tuesday January 30th, 2018 http://bit.ly/GulfNewsChinaBelt