From buyers to sellers: Russians cool on Dubai real estate

May 21, 2024, 4:14 AM

People on the Ain Dubai ferris wheel on Bluewaters Island admire the view of Palm Jumeirah. Both locations were popular with Russian property buyers

‘Exodus’ of Russians from emirate
Currency and cost of living issues
Up to 30% profit in sellers’ market

Russian property owners in Dubai are cashing in and moving to alternative foreign enclaves, pushed out by currency issues and the rising cost of living in the emirate.

Emigrants from Russia flocked to Dubai in 2022 at the start of the country’s war with Ukraine. The UAE, although condemning the invasion, proved a safe haven in the face of tough sanctions on Moscow which locked Russians out of European and North American markets.

That led to a spending spree across prime areas including Palm Jumeirah, Emirates Hills and Bluewaters Island, with parts of the emirate becoming labelled “Little Moscow”.

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However, the Dubai-based brokerage Betterhomes has revealed that Russian passport holders dropped to the third largest buyers of residential property in the emirate in 2023, behind Indian and British nationals, after holding the number one spot just 12 months previously.

Saeed Mohammed Al Qatami, CEO of the Dubai developer Deyaar, told AGBI that Russians have now gone from buying to selling.

“We have seen it really slow down in the last two years. It doesn’t seem that it is attractive for them to invest here,” he said.

In March the Bank of Russia announced that restrictions on foreign cash withdrawals would be extended for another six months until September 9, 2024.

That means withdrawals from foreign currency accounts are limited to $10,000 in cash and are issued in dollars, regardless of the currency in which the account is denominated.

The luxury property broker Barnaby Crompton said: “The unfavourable currency exchange is one of the factors influencing Russian buyers’ decisions to sell properties in Dubai and move to other countries.”

These include Thailand and Vietnam in the east, while Turkey, Greece and Cyprus are popular European alternatives.

“Previously, they were urgently parking their money in Dubai. Now, they’re doing their homework and looking for residences in areas like Asia and Turkey,” said Artur Ahmedov, luxury director at Espace.

Dubai’s cost of living has also proven to be problematic for Russian buyers, observers say.

Andrew Thomson, partner and head of real estate at Al Tamimi & Company, said: “We are hearing regularly from our developer clients that recently they have seen an exodus of Russian investors, particularly from offplan transactions.

“A common factor seems to be financial challenges relating to keeping up payments for units prior to completion.”

An industry source told AGBI that entire blocks in Bluewaters were being sold off.

Simon Baker, managing director at Haus & Haus, a real estate agency in Dubai, said many Russians have also taken advantage of the buoyant property market to sell up and make, in some instances, as much as 30 percent profit on their purchases.

The price of residential real estate in Dubai has continued rising in the first quarter of the year, with average apartment prices increasing by more than 20 percent and villa prices climbing by more than 22 percent, a report from CBRE Middle East said.

Chris Boswell, a real estate agent covering the ultra-luxury sector, said: “Many Russians entered the market on the crest of a wave in Dubai and are now trying to repeat that success in other markets like Phuket in Thailand, which is really taking off now.”

The UAE has come under increasing pressure from the US, UK and European Union to crack down on companies dodging sanctions imposed on Russia.

Nevertheless, said Gary Hales, head of international business at Creation Business Consultants in Dubai, the UAE remained a favourite destination for Russian businesses to set up in.

“We haven’t noticed any significant downturn in the volume of Russians moving here, rather we are seeing them embed themselves into the broader UAE society,” he said.

In March last year the UAE central bank revoked the Abu Dhabi licence of Russia’s MTS Bank, five weeks after the United States and the UK placed the Moscow-based lender under sanctions.