Russia’s rich are driving ups and downs of Dubai property prices

Reuters/Christopher Pike

The last time I had dinner in my favourite Dubai restaurant Il Borro, it took a while to get in.

There were two super young Russian-speaking guys surrounded by eight security guards also coming in – a rather more spectacular entrance than my own.

“Crypto billionaires, those guys. Plenty of them around these days, buying absolutely anything they can get their hands on,” one of the restaurant staff later pointed out to me.

• Sanctions won’t dampen Dubai property allure for Russians
• One in five queries for Dubai homes from Russians

And herein lies the big problem when it comes to the apparent resurgence of the Dubai property market: just how real is it, and how much is fuelled – and skewed – by the ultra-wealthy who have descended on the city in recent months?

First the numbers, which paint a rosy picture.

There is no shortage of reports telling us that things have never been better. Three weeks ago, CBRE said the total volume of transactions in Dubai’s residential market went up by 33 percent to 5,542 in May 2022.

It added that total transaction volumes in the year to May reached 30,903 – the highest total recorded since 2009.

When it comes to prices, CBRE is just as bullish, saying average property rates increased by 10.9 percent in the same period.

Then just last week, Dubai-based W Capital Real Estate Brokerage declared this to be the strongest first-half performance ever, with nearly 43,000 sales transactions, the total value of which exceeded Dh114.5 billion.

But those of you with long memories may recall we have been here before – in 2010, after the great financial crash of late 2008. Property prices started picking up and surging by 2011, before a spectacular fall again in 2012.

If you look carefully at what happened back then, there was a flight of capital into Dubai after the start of the Arab Spring, which arguably artificially inflated prices that were never really sustainable. Mass demand wasn’t there, just mass spending.

All of which brings me back to the crypto boys. The most interesting report I have come across in recent weeks is not a property one, but the one from London-based investment migration consultancy Henley & Partners.

The London-based investment migration consultancy says the UAE will attract a net inflow of 4,000 millionaires from Russia in the fall-out from the war with Ukraine.

That is not just a huge number but the most of any country globally.

Actually, long before the war the UAE was attracting many of the super-rich thanks to its low tax regime, high vaccination rates and all-round great healthcare and education systems.

“The UAE really ticks all the boxes in serving the needs of the ultra-wealthy,” Dominic Volek, Henley’s Dubai-based head of private clients, said in an interview with Bloomberg. 

We all know that the mega-wealthy actually need just two things when they arrive in a new country, which are the same two as most of us: a place to live and a good school for their kids.

But the difference is, most are not looking at a two-bedroom to rent in JLT with 12 cheques. They want the biggest and the best. 

This ties in with the rest of the W Capital Real Estate Brokerage, which says the top two transactions in the Dubai property market were for land in Palm Jumeirah sold for Dh80 million, followed by land that was sold for Dh59.1 million in Saih Shuaib 3.

The top three transfers for apartments and villas were an apartment sold for Dh686 million in Burj Khalifa, an apartment sold for Dh549 million in Marsa Dubai, and an apartment sold for Dh276 million in Business Bay.

All big, big, numbers – big enough to skew any “average” rises. 

I am not arguing that we face another 2012 scenario of collapsing prices. Dubai is too stable and secure a market.

But the wild predictions that we never had it so good, and prices can only keep rising may be misplaced.

If each of those 4,000 Russians predicted to move to the UAE (many already have) spent just $2m each on a new place, that’s $80bn (AED293bn).

One early pointer to what may be happening is the wild fluctuations in listed prices for mid-level apartments. Pick any area in Dubai and any property website: for example in the Palm Jumeirah you will find the same three-bedroom apartment listed for between AED2.5m and AED3.5m. 

In other words, nobody really knows what’s going on. 

There is another possibility here, which is the one I hope is correct: gone are the days of steep rises and falls, delight and misery. 

Dubai may finally be maturing into a steady, mature, slow burning (rising) market – one that is, as they like to say in the west, “safe as houses.”

Anil Bhoyrul is a veteran Middle East journalist and founder of Dubai-based JES Media